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Cutting capital budget would be a mistake

Posted: Wednesday, May 26, 2010

Governor Parnell has indicated that he intends to veto a significant number of projects in this year’s capital budget. That would be a mistake.

Vetoing one-time capital investments is simply short-sighted. Government growth is driven by ever increasing operating budgets, not capital expenditures. Individual vetoes may reduce spending this year, but they do nothing to restrain the growth of state government and may actually hinder economic development. Alaskans can be confident that this year’s capital budget is targeted, appropriate and responsible. Capital spending stimulates private sector employment and has a tremendous impact on Alaska’s local economies. Those benefits can’t be underestimated. With a weak national economy, soft housing market and stagnant job growth, this year’s budget is especially critical.

Last year, when revenue was tight, the legislature trimmed Governor Palin’s capital request by nearly $500 million dollars, limited state spending to $488 million and delayed hundreds of critical infrastructure projects around the state. Two years ago, state capital spending totaled $2.3 billion. This year’s budget appropriates $2.05 billion or $250 million less in state funds. Given last year’s minimal budget, this is a reasonable level of spending and well within historical norms.

The legislature has put a substantial amount of money in reserves. This session we set aside an additional $1.5 billion in savings and paid off the debt to the Constitutional Budget Reserve. Alaskans now have nearly $12 billion in savings with an additional $35 billion in the Permanent Fund. But at some point, growing cash reserves at the expense of making critical, multi-generational infrastructure investments is illogical. The state’s operating budget has more than doubled in the last decade, a rate of growth that far exceeds inflation, population or any other rational measure. This virtually guarantees that our savings will be quickly consumed by government benefits, programs and salaries. If the Governor wants to make legitimate cuts in government spending, he needs to give more scrutiny to his administration’s $8 billion operating budget than he does to individual capital appropriations.

I urge the Governor to consider the separate and distinct role the legislature plays in establishing Alaska’s financial priorities. This capital budget was developed with full public participation. These projects aren’t legislative priorities, they’re Alaska’s priorities. Legislative additions were vetted in an unprecedented, open and deliberative process. Supporting documentation for these projects is better than it’s ever been. Well before the budget was transmitted, the information was online and available for public review. This year over 450 statewide organizations — local governments, school districts, community councils and other groups — requested in excess of $3.7 billion for 1,700 individual projects around the state. Ultimately, it is the legislature that has the difficult task of prioritizing among all these legitimate needs. This budget is a delicate, political balance between equally important constituencies. I would note that nearly $2 billion or 63% of this year’s capital budget is spending proposed by Governor Parnell. While the legislature scrutinized his spending proposal, we ultimately approved 100% of his request — not because we agree with everything in it, but because we recognize how difficult it is to prioritize among all his agencies’ needs. Just as the Governor relies on state commissioners to help determine government priorities, legislators rely on the councils, school boards and communities we represent. Heavy-handed vetoes this late in the process diminishes our role and has the potential to create adversarial relationships among communities, neighborhoods and constituents across Alaska.

I know Governor Parnell wants what is best for Alaska. I trust that he will respect the legislative process and put Alaskan jobs, households and the state’s regional economies first.

• Burt K. Stedman is a Republican state senator from Sitka and is co-chair of the Senate Finance Committee.

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