Republicans split budget

Move aims to keep governor's hands off successor's money

Posted: Sunday, March 17, 2002

In wrapping up its "hold-the-line" state budget Saturday, the House Finance Committee underscored its lack of trust in the spending policies of the outgoing Knowles administration.

The Republican majority on the committee divided much of the 2003 budget into two parts so that no more than half of the annual allocation for many programs could be spent during the first six months of the fiscal year, July 1 to Dec. 31, 2002.

That's to ensure that Democratic Gov. Tony Knowles, who leaves office in early December, doesn't allow agencies to spend some of the funds intended for his successor, according to House Finance Co-Chairman Eldon Mulder of Anchorage.

"I don't want to tie the next administration's hands," Mulder said. "This administration has shown no restraint when it comes to spending money."

Republican Rep. Bill Hudson of Juneau joined the three Democrats on the committee in voting against the first of four amendments implementing the budget "bifurcation," losing 7-4. Hudson, a former administration commissioner and ferry system director, left the room before the other three amendments passed on straight party-line votes.

Annalee McConnell, director of the Office of Management and Budget for Knowles, complained that there was no notice that the committee was considering breaking the budget in two and thus no opportunity to consult with variousagencies about potential impacts.

"God help the next OMB director," McConnell said. "There are obligations that do not fit neatly within six months. ... It's astonishing to me."

Nothing similar has been attempted in past transitions between administrations, said Rep. Eric Croft, an Anchorage Democrat. "I think this is a new low."

The bifurcation exempts some agencies and functions, notably the University of Alaska, K-12 education, the Marine Highway System, various medical and social services, the courts, the Legislature and the Alaska Permanent Fund Corp. It also allows agencies to shift 5 percent of the semi-annual allocations to programs that need more revenue early, with offsetting reductions in lower-priority spending.

Mulder said the new budgeting method came about because some administration officials, whom he didn't name, have said they will spend as much as they see fit during their last months, possibly short-funding the next administration.

"He just made it up out of whole cloth," McConnell retorted, in an interview. "I was rather taken aback."

Mulder insisted that his concern is valid whether the next governor is Republican U.S. Sen. Frank Murkowski or Democratic Lt. Gov. Fran Ulmer, the leading contenders for the major party nominations.

"If I were Gov. Ulmer, I'd want this protection, as well," Mulder told reporters afterward.

Playing down the conflict, Rep. Jim Whitaker, a moderate Republican from Fairbanks, said the bifurcated budget is based upon differences between the political parties on government spending.

"We disagree from time to time," Whitaker said. "This is the manifestation of one of those disagreements. That's not 'a new low.' It is politics."

Overall, the $2 billion-plus general fund budget, scheduled for House floor debate Monday and Tuesday, is being held constant from the current fiscal year. Because of formula-driven programs that have increased costs, House Republicans have identified $90 million in offsetting cuts.

Rather than a "hold-the-line" plan, the Republican product is "a flat-line budget," said Rep. John Davies, a Fairbanks Democrat. "I use that in the medical sense."

Mulder said that many failed Democrat-sponsored amendments to restore program cuts were meritorious by themselves. But he said the state doesn't have the means now to satisfy the public's appetite for services.

Democrats responded that new revenues obviously are required. Proposals to raise taxes and use permanent fund earnings are scheduled for a committee hearing Wednesday.

Democrats were joined by Hudson and Finance Co-Chairman Bill Williams of Saxman on an amendment to restore about $5 million that was cut from the governor's $45.7 million request for the ferry system. They lost 6-5.

Instead, the committee increased the Marine Highway System's "receipt authority" by $4 million, which would allow the collection of additional fares.

OMB Director McConnell said the ferry system can't raise that much additional money, given that summer bookings are well under way. It would require a $20 fare increase or surcharge on 200,000 trips, she noted.

"They won't do service based on phantom revenues," she said.

Rather the ferry system is likely to see less revenue than expected, due to the budget cut, McConnell said. The current plan is to lay up the Taku in Southeast most of the year and to take the Bartlett completely off-line in Prince William Sound.

Bill McAllister can be reached at

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