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New Juneau worry: How much cash for capital budget?

Posted: February 2, 2013 - 9:48pm  |  Updated: February 2, 2013 - 10:27pm

A major concern emerging in the state capitol in Juneau is how much money will really be available for state capital projects in the Fiscal 2014 budget.

The estimates now range from $263 million to $360 million in addition to the $1.8 billion in Gov. Sean Parnell’s proposed budget.

Fiscal year 2014 is the state financial year that begins July 1. Legislators will approve a budget for the year during the 2013 session along with any revisions needed for the current budget.

Last year legislators were able to add about $1 billion to Parnell’s capital budget, which was also $1.8 billion, but there won’t be nearly enough money for similar spending this year, Senate Finance Committee co-chair Kevin Meyer said in a Senate Majority briefing Jan. 29.

Meyer is responsible for the capital budget on the Senate Finance Committee.

A key problem is that there are several critical projects left out of the governor’s capital spending plan. Included among these are money to finish new engineering buildings planned for University of Alaska campuses in Anchorage and Fairbanks, Meyer said.

Money was appropriated in the current state budget to begin work on the buildings, and another $100 million was to be allocated in FY 2014 to finish them.

“Finding $100 million is going to be a challenge if we have only $250 million for capital in 2014,” Meyer said.

Sen. Pete Kelly, R-Fairbanks, who is the Senate Finance co-chair for the operating budget, said one of his concerns is that there is no money in Parnell’s budget for a critically needed upgrade of the University of Alaska Fairbanks power plant, which is about 50 years old.

“This plant provides heat as well as power. It’s a big campus, as big as many small communities, and if there is a hiccup (in heat and power) it could cost us a lot. It would also jeopardize our ability to deliver research services at UAF,” Kelly said.

Golden Valley Electric Association, the local utility for Fairbanks, can provide backup power but there’s no alternative to the existing power plant for steam heat on the campus.

Meyer also said he was concerned about the practice of making appropriations in one year to only partly fund projects because of the disruptive effect if money becomes scarce in financing the completion.

There are even projects in the governor’s capital budget that will need multi-year funding, in stages, he said.

“I’d like to see us fund projects totally rather than in a piecemeal fashion,” Meyer said.

In other developments the Senate’s special in-state TAPS flow committee continued hearings on the governor’s oil tax bill, Senate Bill 23.

Mike Pawlowski, petroleum fiscal systems advisor for the Department of Revenue, described the interplay of changes between tax rates and capital investment tax credits in the bill. Basically the bill ends the controversial “progressivity” formula in the law that hikes tax rates at higher oil prices, but it also eliminates a 20 percent capital investment tax credit for industry.

The combination of these changes would give industry more long-term gain than under current law but it would also take away short-term tax benefits to companies, through the tax credits, that are becoming very expensive for the state.

In upcoming Fiscal 2014 the tax credits are estimated to cost the state treasury about $1 billion, according to state budget estimates.

The Senate committee will continue hearings on the bill with industry appearing the week of Feb. 4. Hearings have also been held in the House by the Resources Committee.

Meanwhile, Senate Democrats say they will introduce an alternative proposal on oil taxes to Parnell. Sen. Bill Wielechowski, D-Anchorage, said the “Democratic Alternative” to the governor’s proposal will be introduced the week of Feb. 4.

“Our bill will meet the governor’s objective of putting more oil in the pipeline but will not be a big giveaway,” of revenues to the industry, he said.

Sen. Hollis French, D-Anchorage, said the Democrats’ bill will tie tax reductions to performance.

“Every person I talked with last summer said we should do this like a business deal, and make sure we get more oil. Simply dropping progressivity doesn’t do that. Everyone wants to see more investment on the North Slope,” French said.

In another development, the Resources Committee passed out the governor’s bill easing end-of-pipe pollution standards for cruise ships Jan. 29.

Senate Bill 29 would allow cruise ships to use a “mixing zone” where effluent is diluted when a ship is underway. The state water quality standard — that the water be suitable for human consumption — is still met, but at the edge of the mixing zone.

Mixing zones are now commonly used by industry and municipalities because the technology to achieve drinking-water quality at the end of a discharge pipe is not available, said Sen. Cathy Giessel, R-Anchorage, chair of the Senate Resources Committee, at the Jan. 29 briefing.

“A scientific advisory committee had taken a hard look at this (the cruise ship issue) and the conclusion was that there is no technology available that would allow the ships to meet the standards,” Giessel said. “When one of these ships is underway it takes 10 seconds for any discharge to be out of the mixing zones and meeting the state water quality standard.”

One critic of the Resource Committee action is French, an Anchorage Democrat who is on the committee. French said the presentations were one-sided in that the Department of Environmental Conservation had time to present the bill in detail, while others with different views had only a short amount of time.

“One dissenter on the science advisory committee was not allowed sufficient time to make her points,” French said. “I’d still like to see a thoughtful presentation of all sides on this.”

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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