Alaska legislators rush to finish budget work

General fund portion of operating budget expected to grow 11%

Posted: Tuesday, March 02, 2010

Legislators in Juneau are scrambling to finish subcommittee work on the state operating budget, with a goal of having a proposed spending plan for state agencies ready for public hearings the first week of March, House Finance Committee Co-chair Mike Hawker, R-Anchorage, said Feb. 22.

It now appears that even with lean budgeting, the state general fund portion of the operating budget will grow 11 percent next year, Hawker said.

Part of this is in state formula programs like Medicaid, where spending increases are driven by changes in population. About 5.6 percent of the increase is in state agency budgets, Hawker said.

Paying for this will require crude oil prices averaging about $74 per barrel over fiscal year 2011, which begins July 1, he said. Oil revenues provide about 90 percent of state general fund income.

"Our spending appetite puts us in a very delicate position. With even a moderate decline in oil prices we could rapidly be having to draw on reserves," Hawker said.

Hawker said he is particularly concerned with rapid growth in the state Department of Health and Social Services budget and the apparent lack of good financial controls within the department. The problems appear to have been corrected but Hawker will ask legislative auditors to do an independent verification, he said.

Meanwhile, work continues on the state capital budget. Rep. Bill Stoltze, R-Chugiak, who co-chairs the House Finance Committee with Hawker, said there are discussions underway on having some money available for community appropriations, such as to municipalities, local schools and nonprofits, but how much this will amount to is still being discussed.

"The plan is still being developed. We have to see the big picture first, of how much money will be available," Stoltze said Feb. 22.

About $3.5 billion in requests for community capital appropriations have come in to the House Finance Committee, but there won't be enough money to fund all requests, Stoltze said.

Most discussions have been around a figure of several hundred million dollars for the grants.

"This is a matter of vigorous and enthusiastic debate among all 60 members of the Legislature," Hawker said.

In the state Senate, Sen. Gary Stevens, R-Kodiak, said substantial work is being done on Gov. Sean Parnell's proposal for merit-based college scholarships, but legislators are leaning toward including a "needs-based" component to help students who are strapped for money.

However, the hurdle of funding the program is still there. Parnell has proposed using $400 million of a projected state revenue surplus to pay for the scholarships.

"Establishing the scholarship program is one step. Paying for it is the second step, which is bigger," Stevens said.

On another front, the Legislature is moving to patch up state campaign disclosure laws following a recent U.S. Supreme Court decision that will invalidate campaign financing limits in many states, including Alaska.

Sen. Hollis French, D-Anchorage, introduced legislation Feb. 19 that would require organizations like private firms and unions to disclose any contributions they make to a candidate or in support of a ballot proposition, and to attach their names to any advertisements they sponsor.

French said his bill covers many of the gaps in state law identified in a state Attorney Generals' opinion on the U.S. Supreme Court decision that was also issued Feb. 19.

Alaska's laws are now silent on requirements of corporations, unions or other organizations to disclose contributions because current law also prohibits those contributions. Because the Supreme Court decision effectively nullifies the law, corporations and unions may be free to support candidates without disclosing how much they are spending.

Senate Majority Leader Johnny Ellis, D-Anchorage, said the issue was forced on the Legislature by the Supreme Court decision. "The governor has said we need to do something about it. The general consensus is that it's a mess," unless the Legislature moves quickly to change state law on disclosure.

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