Capital budget passes with deep cuts

City' s Johnson Youth Center renovation among casualties

Posted: Wednesday, April 22, 2009

In an unusual reversal of past legislative practice, the recently completed session saw the Legislature and the governor compete to cut projects from the state's capital budget.

Brian Wallace / Juneau Empire
Brian Wallace / Juneau Empire

The capital budget typically grows while moving through the process, as legislators add support for items relative to their districts.

This year, even as the state's financial picture got brighter, the cuts got deeper. Among the casualties to Juneau was $9.5 million for renovations to the Johnson Youth Center, and the chance at $150 million in federal matching money.

Sen. Bert Stedman, R-Sitka, said the Legislature had no choice, given the budget Palin submitted and the declining price of oil.

"The capital budget was large, a couple of billion dollars, and quite frankly the state couldn't afford it," he said.

The budget Palin submitted was about $2.3 billion. By the time it got through Stedman's Senate Finance Committee, it was a half billion dollars lighter.

Contributing to the clash between the Legislature and the governor may have been a lack of direction. During the past two sessions, Palin wouldn't say how much the state should dip into its savings.

In April, the Department of Revenue issued an updated Spring Revenue Forecast projecting an additional $355 million in revenue, and $25 million more for the next fiscal year.

While in past years more money might have meant more spending, both top legislators and the governor were determined to scale back capital spending, the one-time expenditures for everything from new roads to new computer systems.

After the Senate Finance Committee made $500 million in cuts to spending that Palin had requested, she said "right on." Palin then offered to sit down with lawmakers and take even more projects out of the budget.

"Our constituents want us to quit spending so much money," she said.

The House Finance Committee agreed to the cuts, said Rep. Bill Stoltze, R-Chugiak. He denied that it was a competition to cut more. "It's not a game of chicken," Stoltze told the Alaska Budget Report.

Palin maintained she was fine with the cuts, even though they slashed projects she first requested.

"I will always err on the side of wanting to spend less rather than more," she said.

Rep. Beth Kerttula, D-Juneau, said that given the current low price of oil and economic outlook, which will mean dipping into savings to fund even the reduced capital budget, she has little objection to frugality.

"I can't really argue too hard against it this year because of the downturn," she said.

Palin, though, accused the Legislature of "a little bit of inconsistency" which "perhaps made our job a little more difficult" with some of its cuts.

Palin's Office of Management and Budget Director Karen Rehfeld said the Legislature failed to appropriate about $15 million needed to match federal aviation and highway money.

Palin and the Legislature spent much of the session clashing over whether or not to accept federal stimulus money. Legislators decided to accept nearly everything available after they determined that Palin's claims the money had strings attached were unfounded.

At the end of the session Sunday, Palin said the cuts to the matching funds showed hypocrisy on the part of the Legislature.

"They were quite adamant that no federal funds be left on the table, but we're seeing in our regular budget process ... having just left about $150 million in federal matching funds on the table," she said. "Some of those matching funds would be truly for economic stimulus projects with infrastructure."

• Contact reporter Pat Forgey at 523-2250 or

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