Knowles backs budget increase

Governor says funds needed for education, jobs

Posted: Friday, December 15, 2000

Gov. Tony Knowles today proposed a state general fund spending increase of $145 million to shore up education, strengthen law enforcement, protect public health and safety, and lay the groundwork for a natural gas pipeline.

But while laying out his priorities for a "jobs and families" agenda, the Democratic governor acknowledged that he faces "a healthy skepticism" from the Republican-controlled Legislature, the only one in the nation that has been cutting overall state spending.

Knowles also said he will renew his call for a long-range fiscal plan during his annual State of the State address during the first week of the legislative session, which starts Jan. 8.

The governor's budget, presented at a news conference in the Capitol, would bring up state general fund spending by 6 percent to $2.41 billion in the 2002 fiscal year, which begins July 1, 2001.

About $80 million of the $145 million increase would be to "annualize" expenditures begun after the start of the current fiscal year, pay off bonds, replace one-time sources of money that have been exhausted, and accommodate increasing program caseloads, such as in Medicaid. The balance of $65 million would go for public schools, the University of Alaska, criminal justice and child protection, a public health initiative, and increased staffing at Pioneers' Homes.

The new spending would be covered by a $530 million withdrawal from the Constitutional Budget Reserve, a dwindling state savings account, now about $3 billion, that has been used to plug budget gaps. Although high oil prices have produced a surplus in the current fiscal year, they are projected to fall from more than $30 a barrel to $24, bringing back the budget deficits that have been common in recent years.

Total spending from all fund sources would increase by $286 million to $7.23 billion, including nearly $2 billion in federal funds and $1.9 billion to pay Alaska Permanent Fund dividends and to inflation-proof the fund. Included is a capital budget of almost $1.2 billion to fund highway, airport, and sewer and water projects, as well as some deferred maintenance.

Knowles presented the budget as "a responsible, careful approach to spending the public's resources," and said it reflects $1,689 less in adjusted per capita spending than the state budget for fiscal year 1979, the last before the oil boom.

For example, while the state's population has increased 50 percent in 25 years, the number of state troopers has dropped by 100 in that time, he said. He proposes to add 10 troopers and 20 more village public safety officers.

The governor said he knows the budget will get careful scrutiny from the Republican majority in the Legislature, which last session completed a five-year mission to cut $250 million from the budget.

"It's my job to look at priorities on a statewide arena," he said. "To meet the healthy skepticism that the Legislature will have, there has to be broad public support for this effort." To that end, a record number of budget documents was posted today on the governor's Web site.

Juneau Sen. Kim Elton, a Democrat recently appointed to the Senate Finance Committee, welcomed Knowles' "investment in human infrastructure," notably spending increases for education and alcohol treatment programs. "This is beginning to bring some balance back" after the five-year Republican plan, he said.

Chairmen of the House and Senate Finance Committees couldn't be reached for comment this morning. But legislative leaders have warned, and Juneau Republican Rep. Bill Hudson repeated this morning, that the end of the five-year plan doesn't mean the "floodgates are open" for new spending.

Hudson, a new member of the House Finance Committee, said the majority will stick with "a results-based budgeting process" that will make the administration justify not only proposed new spending but previous spending increases that have been approved.

"That doesn't have to be contentious," he said. "(But) the governor will not get everything he asks for. That's just an inevitability."

Knowles said his State of the State address will repeat his call for new taxes as part of a long-range solution to the budget gap, although he said he hasn't decided how specific he will be this time.

Hudson agrees with Knowles on the need to keep public discussion going on a long-range fiscal plan. He said he and Sen.-elect Alan Austerman, a Kodiak Republican who is now in the House, will present something similar to Hudson's bill from last year.

That bill would have diverted about 20 percent of Alaska Permanent Fund earnings calculated to be available for distribution each year into funding state government, while still inflation-proofing the fund and maintaining dividends close to the projected level. Alternative approaches could include transferring that amount to the Constitutional Budget Reserve, Hudson said. "Suffice it to say, I'm not totally certain where this will go."

Bill McAllister can be reached at

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