While Alaska's capital budget is already being called "bloated" by critics, the debate now is about borrowing more money, up to $400 million more, to build even more.
While some are contesting the wisdom of spending so many state dollars on the large, one-time projects that make up the capital budget, what most are debating is the method of borrowing more.
At stake for Juneau may be the fate of one of its top legislative priorities, as much as $20 million for a new state library, archives and museum building in Juneau to replace cramped and aging facilities.
Gov. Sean Parnell has recommended financing some state priority projects with certificates of participation," similar to bonds but which don't require voter approval. Others, including top House and Senate leaders, are pushing for general obligation bonds, shifting the final approval of the borrowing and increased spending to the voters, who would have to approve the bonds.
"Some of these are big-ticket items," said House Speaker Mike Chenault, R-Nikiski. "Maybe the citizens of Alaska should speak on some of these issues."
Also in the list of projects for which legislators want to borrow money are three new school buildings in Western Alaska costing $128 million, and new university buildings in Fairbanks, Anchorage, Kenai and Prince Willliam Sound, the largest of which is a $60 million arena and athletic facility for Anchorage.
Gov. Sean Parnell proposed using certificates of participation to fund more construction, and said that method is better for the state's struggling economy than waiting until the fall for an election to authorize general obligation bonds.
"The problem with G. O. Bonds is you have to wait a year" to begin projects, Parnell said a a press conference last week.
"With the certificates of participation I proposed, Alaskans get the jobs now," he said.
Sen. Lyman Hoffman, D-Bethell, co-chair of the Senate Finance Committee, said there was a more fundamental reason to go to the voters for bonding approval. The Alaska Constitution required approval of the voters before the state can incur debt.
"For us to go into debt we have to have voter approval," Hoffman said. "Certificates of participation are a way to get around voter approval."
Hoffman said this is the 26th Alaska Legislature, and that borrowing without voter approval had been done by previous legislatures. Hoffman has been a lawmaker since 1986.
Some legislators, including those who support the increased spending, questioned borrowing by any means to do it. The borrowed money, warned Rep. Les Gara, D-Anchorage, would have to be paid back at time when declining oil production in Alaska would mean the state would have less money than it does.
"We are going to saddling people (with the debt) who are going to have a hard time paying for this in the future," he said.
Paying cash for the projects, would give an immediate construction boost to the economy.
"With bonds, the work doesn't get on the street this summer," Gara said.
Borrowing could benefit the state, however, Chenault said, if the state can borrow money at 3 to 3.5 percent and invest state general fund dollars to get a better return than that.
Sen. Bert Stedman, R-Sitka, co-chair of the Senate Finance Committee, said interest rates are subsidized for Build America bonds.
"There's some extremely low interest rates, with the Obama administration paying part of the interest rate costs," Stedman said.
Stedman also doubted that a state that currently has $12 billion in savings, not counting the permanent fund, couldn't pay the bond interest over the years.
"I wouldn't buy the premise that we won't have the cash," he said.
The proposal to use general obligation bonds to fund the $400 million in projects has passed the House of Representatives with Gara joining Chenault in the 40-0 vote in favor late Monday night.
The borrowing proposal, House Bill 424, is scheduled to be heard by the Senate Finance Committee this morning.
Contact reporter Pat Forgey at 586-4816 or email@example.com.
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