Proposal taps permanent fund for gas pipeline

About $7 million in fund's earnings would pay for prep work for building pipeline

Posted: Friday, March 04, 2005

The Senate Finance Committee wants to earmark Alaska Permanent Fund earnings to pay for preparatory work for a proposed gas pipeline from the North Slope.

Permanent fund earnings would pay for about $7 million of the $28 million requested by the departments of Law, Natural Resources and Revenue for gas pipeline work, under the proposal. The balance would come from the general fund.

That includes the legal costs, analyses, right of way permitting and increased workloads department officials say are needed to start preparing now for a proposal to build a pipeline to bring Alaska's natural gas reserves to market.

In addition, permanent fund earnings would pay for $125,000 of the $500,000 requested by the governor for Arctic Power, a group lobbying to open the Arctic National Wildlife Refuge to oil drilling.

Senate Finance Co-Chairwoman Lyda Green, R-Wasilla, said permanent fund earnings have been used in the past for programs that can be tied to the fund. If the gas pipeline is built, that money will be returned to the permanent fund many times over, she said.

Senate Finance Committee member Donald Olson, D-Nome, said the governor and some lawmakers campaigned on the promise not to use money connected to the permanent fund without a public vote. Olson said it is a slippery slope when lawmakers start tapping into permanent fund earnings to pay for programs.

"That I feel is a violation of trust that was given to the people," he said.

The finance committee on Thursday passed Gov. Frank Murkowski's fast-track budget supplemental request, in which the gas line and ANWR proposals were included.

The committee added about $1 million in general fund spending to the governor's original request, bringing the total to $98 million from the general fund to pay for this year's additional state government costs, along with the cost of some new programs for this year and next.

The total fast-track request - including general fund spending, federal funding and other revenue sources - is $244 million.

"It's a pretty good package," Green said.

The supplemental request is scheduled to go before the full Senate on Friday.

Office of Management and Budget Director Cheryl Frasca said she was pleased the finance committee moved quickly on the request. The committee spent three weeks hearing testimony from representatives from each department making a funding request.

"Too often the fast-track supplemental gets bogged down," Frasca said.

The finance committee cut from the governor's request $500,000 for a breast and cervical cancer screening program that lost a portion of its federal funding.

Dr. Richard Mandsager, director of the state Division of Public Health, said without the funding, the program will likely have to raise its eligibility age to women 40 to 64.

Currently, women 18 to 64 are eligible. Raising the eligibility age would reduce by half the number of women screened, the division estimates.

Green said the state has to be careful when deciding what lost federal dollars it will replace, especially with the prospect of a reduction of the federal government contribution to the state's Medicaid costs. That federal reduction is estimated to be $53 million in its first year.

Taking on programs that will only grow in the future may be untenable, she said.

"We have to say, 'What can this state afford, and do we want it to grow?"' she said.

Olson said he had reservations about some of the programs cut by the committee, particularly the cancer screening program.

"Certainly (medical) costs are astronomical, but they would be exponentially higher if somebody catches the disease later," he said.

Other cuts by the finance committee include reducing a $1 million request to the Disaster Relief Fund to $500,000. An $800,000 request for Mt. Edgecumbe, a state-run boarding school in Sitka, was cut to $400,000.

A $446,000 National Guard request to cover state expenses that were disallowed by federal auditors was cut to $297,300. And a request by the Department of Corrections for $225,000 for a procurement application was cut to $190,000.

The committee added to the supplemental request $5 million from the state Information Services fund to pay for security upgrades after hackers broke into the state's computer network in January.

Another addition was $6 million to the Alaska Land Mobile Radio project, which would set up an emergency communications network between federal, state and military agencies.

Other additions include $160,000 to the Division of Elections; $3.2 million from the Alaska Marine Highway System fund to pay for a collective bargaining agreement; and $8.7 million in federal funds for airports and runways in Cold Bay, Deadhorse and Unalaska.

The governor's $6.5 million small energy assistance program was kept after the finance committee added the condition that the grants to small communities would be used only for fuel.

The supplemental budget request also is pending in the House Finance Committee.

Another $43.6 million in supplemental budget requests are included in a separate bill still in the finance committee.

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