Senate passes state operating budget

Posted: Tuesday, March 25, 2008

It would have been unthinkable two years ago: lawmakers arguing over whether to pad the state savings account with $1 billion or $3 billion on top of several billion already proposed.

Chris Miller / The Associated Press
Chris Miller / The Associated Press

But such is the nature of state revenues as money from high oil prices and a new production tax continues to cascade into state coffers.

Given the new fiscal scene, it was savings, not spending, that dominated the legislative debate as the Alaska Senate approved an $11 billion operating budget Monday for state agencies and K-12 education next year.

As part of that plan, a bipartisan Senate majority successfully proposed an addition of $1 billion from next year's surplus revenues to the state savings account, the Constitutional Budget Reserve Fund.

Lawmakers are already planning to put at least $2.6 billion into the account from this year's surplus and another $1 billion into a different account.

Republican minority members said that's not enough, however.

Senate Minority Leader Gene Therriault, R-Fairbanks, pointed to a recent report from the University of Alaska that says the current rate of state spending is not sustainable.

He proposed setting aside a total of $2.9 billion, adding that the extra money would allow the operating budget to pass at the proposed level while leaving another $350 million in state general funds for the capital budget.

"Why wouldn't we set it aside," Therriault said. "If the concern is that we haven't done a capital budget yet. I tell you that's part of my concern."

He said he fears a spending free-for-all over construction projects around the state because lawmakers have failed to set a spending cap in the capital budget.

Sen. Bert Stedman, R-Sitka, said lawmakers should wait to put aside additional savings until the 2009 supplemental budget in the next legislative session.

He said volatile oil prices could change the state's fiscal picture in a hurry.

State revenue forecasters last fall projected oil prices would be $66 a barrel and, with prices continuing to climb, lawmakers are currently building a budget based on $83 a barrel. But if prices can go up, they can just as easily go back down, said Stedman.

"To take the cushion and lock it up in the CBR is irresponsible at best," he said. "To my knowledge, it's never been done in the history of the state to tie the physical hands of the state so it does not have the ability to maneuver."

For all the talk about savings, the operating budget, which passed 15-4, is really about spending. It would draw about $5.2 billion from the general fund, $4 billion from other state funds and $1.7 billion from federal funds. It represents about an 11.5 percent increase in spending over last year, according to lawmakers.

Lawmakers also considered adding an extra $20 million to schools through school improvement grants.

Sen. Gary Wilken, R-Fairbanks, withdrew the amendment, however, saying it was his understanding that schools would be getting more money through a separate appropriation, perhaps as an energy grant.

Stedman said an additional appropriation for schools will be added in another budget bill.

The budget includes $60 million in revenue sharing and $175 million for oil and gas tax credits and more than $310 million to fund negotiated state employee salary increases.

At Gov. Sarah Palin's request, senators added about $13 million to various programs in one lump amendment, including $6.1 million for outside legal assistance in oil and gas issues, $676,000 for operation of shooting ranges in Anchorage, Fairbanks and Juneau and additional money for troopers, health and social services public affairs office and election workers.

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