Palin outlines savings, spending plans

Governor says $7.1 billion windfall should be set aside for the future

Posted: Thursday, December 06, 2007

Alaska expects to get a windfall from oil taxes in the next few years that will allow the state to set aside $7.1 billion for the future, Gov. Sarah Palin said Wednesday.

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At a press conference at Anchorage's West High School, Palin outlined her plans for creating special new accounts where the money could be saved for certain programs, as well as adding to the Alaska Permanent Fund.

"Today, we are going to set aside more than $7 billion for your future," she told the students.

Some of the money will go toward inadequately funded teacher retirements and some to pay down existing debts, including hundreds of millions of dollars taken out of the Constitutional Budget Reserve in previous years.

Governor's plan

How Palin hopes to save $7.1 billion over two years:

• $2.6 billion to help fund public education in the future.

• $1 billion fund whose earnings would be used for transportation infrastructure.

• $450 million contribution to the Teacher Retirement System to reduce the system's unfunded liability.

• $379 million replenishment of the Constitutional Budget Reserve.

• $250 million to the Alternative Energy Fund

• $2.4 billion to the Alaska Permanent Fund's principal, from the fund's earnings reserve.


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The savings plan also includes moving $2.4 billion from the permanent fund's earnings reserve to its principal, making it much harder for the state to tap.

Palin said now was a good time for an oil-dependent state to be saving for the future.

"Oil prices aren't always going to stay this high," she said.

Palin said she based her recommendations to the Legislature in part on an online survey, which drew nearly 11,000 responses.

Palin spokeswoman Sharon Leighow acknowledged it was not a scientific survey, though the state did have safeguards in place to ensure only one vote per IP address was counted.

The turnout, Palin said, shows how much Alaskans care about saving for their future.

"It's obvious you do care where we save," she said.

Rep. Mike Chenault, R-Nikiski, co-chairman of the House Finance Committee, said it was too early to say how Palin's plan was likely to fare in the Legislature, but that some of the things he heard from the governor will likely win lawmakers' favor.

"Without knowing what is in the operating and capital budgets, it's hard to know what all pieces of her savings plan the Legislature will agree to," he said.

He's already heard support for some of her proposals, he said.

One of Palin's recommendations is to spend $379 million reimbursing the Constitutional Budget Reserve for money taken out in past years when budgets weren't so flush. Palin acknowledged that didn't replace all the borrowed money, which is required by law to be replaced, but said that would take a long-term effort.

Last legislative session, the state expected a budget surplus and contributed $50 million of its expected surplus to replacing the money.

Another of Palin's proposals was to use the surplus to pay down the unfunded liability of the Teacher Retirement System. That's one of the state's two big retirement plans, along with the Public Employee Retirement System, which together have $8 billion to $10 billion more in liabilities than they have money set aside to pay benefits.

Palin recommended putting $450 million from the current year's surplus into TRS, which would save the state money in the future because it would reduce the amount that has to be set aside each year.

That's because the state picks up most of the cost for education, while money spent on the Public Employee Retirement System also would save money, but for local governments as well as the state.

The state gets "more bang for the buck," with TRS, said Karen Rehfeld, director of the Office of Management and Budget.

House Finance Committee Co-chairman Rep. Mike Chenault, R-Nikiski, said he's heard strong support among legislators for the TRS contribution.

Palin recommended putting $250 million in an alternative energy fund, to pay for hydroelectric, wind, geothermal, biomass, tidal or other new energy sources. That would be especially helpful to rural communities struggling to cope with the high cost of diesel power generation.

There's clearly already support in the Legislature for that effort, some legislators said.

House Speaker John Harris, R-Valdez has sponsored a bill to create a renewable energy fund. All three members of Juneau's delegation have signed on as co-sponsored.

"I really feel that we need to take leadership in alternative energy," said Rep. Andrea Doll, D-Juneau.

Doll told the Empire before the governor's announcement that she'd gone to the governor's survey Web site and cast a vote in favor of the alternative energy fund.

Palin also proposed creating a $1 billion transportation endowment fund, from which earnings would be used to pay for transportation infrastructure.

That would help Alaska keep its lowest-in-the-nation gas tax, even while federal highway funds dwindle.

• Contact Pat Forgey at 523-2250 or

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