Capital budget, schools lead a big list of state projects

Bill to use permafund earnings grows to nearly $450 million

Posted: Tuesday, April 26, 2005

Alaska lawmakers are looking at whether they have the means to spend a whopping $950 million in mostly state money to pay for roads, school construction and other capital projects next year.

With the end of the session two weeks away and versions of next year's operating budget already approved by the House and Senate, the Legislature's attention has shifted to creating a capital budget.

The state spending for that budget is shaping up to be between $400 million and $500 million, said House Finance Co-Chairman Kevin Meyer, R-Anchorage.

Additionally, a bill to use Alaska Permanent Fund earnings to wipe out schools' deferred maintenance list and pay for new construction has grown to nearly $450 million, he said.

But the future of that bill, Senate Bill 155 by Sen. Ben Stevens, R-Anchorage, is still in doubt as lawmakers, Meyer among them, question taking that large a chunk from the earnings of the permanent fund.

"Whether Senate Bill 155 passes with the school projects, we're still going to have a decent capital budget as it looks now," Meyer said.

Lawmakers are still working out the hodgepodge of funding sources for the budget. They could include excess oil revenue, a variety of bonds and earnings from an oil settlement within the Alaska Permanent Fund called the Amerada Hess account.

The $500 million state spending capital budget plan is somewhat in line with the proposal by Gov. Frank Murkowski, who submitted a $1.4 billion plan to the Legislature, about $825 million of which would come from federal money.

The main difference is the governor has proposed using $340 million from Amerada Hess earnings to repay bond debt for capital projects, including a transportation package of priority roads.

"That's not the route we're going to go," Meyer said Monday.

Meyer said $60 million of the Amerada Hess account would still be a key to next year's capital budget, but he has submitted his own proposal to pay for most of Murkowski's roads projects with Grant Anticipation Revenue Vehicle bonds, or GARVEE bonds. With GARVEE bonds, the state borrows on the anticipation of future federal highway money.

Murkowski said Monday he still prefers the budget be paid by borrowing against Amerada Hess.

"I am convinced that it can be funded with the surplus and a combination of the Amerada Hess," he said.

The more disputed plan is Stevens' proposal to pay for school capital projects with permanent fund earnings. The Senate approved the bill earlier this month when it contained $345 million in capital projects.

During committee hearings, several lawmakers and Alaska residents testified they did not want the Legislature to touch the earnings. Stevens said his plan would lower dividends by just 1 percent and called it an investment in schools.

When the plan arrived at the House Finance Committee, Meyer asked House members to submit their own school project proposals to tack on to Stevens' bill. About $150 million in new projects came in, which was whittled down to $100 million, for a total package of about $450 million.

House Speaker John Harris, R-Valdez, said he believes the measure has "marginal" support in the House, but the size of the list matters.

"I told Sen. Stevens earlier that this is a real problem with this type of legislation, because it becomes very easy for members to want to jump on board," Harris said. "If it gets too big, it's going to die under its own weight just simply because members aren't going to want to support that much money out of the earnings reserve account of the permanent fund."

Sen. Lyda Green, R-Wasilla, who as Senate Finance co-chairwoman has been working on the capital budget for her chamber, said she prefers to see "a more generous budget" for next year, but not one that will break the bank.

She said the costs should go down as duplicate items are rooted out and others are pulled as the funding priorities for next year become clear.

"I don't think everybody gets everything," Green said.

Democrats cautioned the Republican majority leaders about going too far with capital spending proposals which, when combined, range upward of $1 billion.

"I think their ambitions have gotten ahead of their resources," said House Minority Leader Ethan Berkowitz, D-Anchorage.

The bills are Senate Bills 155 and 46, and House Bill 68.

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