Parnell proposes cap on state spending

JUNEAU — Gov. Sean Parnell on Wednesday proposed a spending limit of nearly $6.8 billion in unrestricted general funds for next fiscal year — more than $1 billion less than in the current year.


The proposed cap comes with 2 ½ weeks left in the regular session and with the Senate expected this week to pass a $9.9 billion state operating budget, $5.8 billion of which is unrestricted general funds.

That fund designation refers to money that is not restricted in its use by the law, constitution or other things. As the Department of Revenue points out, that’s the money that most legislative and public debate centers around.

Authorized spending for this budget year includes about $7.9 billion in unrestricted general funds, said Parnell’s budget director, Karen Rehfeld.

Oil revenue provides about 90 percent of the state’s unrestricted revenue, and Parnell has been pushing for a spending cap — as he has in the past. He also wants a five-year fiscal plan, with forecasts calling for continued production declines and the state facing the prospect of having to dip into savings to cover costs for the current year.

Parnell has proposed an oil tax overhaul as a way to boost investment and production that could cost the state up to $875 million next fiscal year alone, under the latest version of the bill. Parnell has said the state will manage the near-term hit — three to five years — using savings, with the expectation that any tax change will lead to more production. The state has about $16 billion saved between two reserve funds.

“We have the savings to do that now,” he said in an interview last week. “We won’t have it if we just continue down this same path of decline and spend from savings with declining production.”

Critics of the tax plan say it’s a giveaway to oil companies with no assurances of what Alaska will get in return.

Parnell on Wednesday said the tax bill, SB21, “offers an Alaska comeback in oil production.” He said the version of the bill that passed the Senate and is now under consideration in the House “will put us on a path to reclaiming our standing as America’s greatest oil-producing state.”

In a separate statement, he said his discussions with lawmakers on the budget have been productive.

“We all agree that decreased oil production means lower revenues for the State, but with a competitive tax climate we expect new production to come online,” he said. “We will be responsible with the people’s money and prudently manage budget reserves until the Trans-Alaska Pipeline System is moving more oil.”

“We remain committed to stepping down the levels of spending over the next five years as we drive economic growth and opportunity for Alaskans through lower taxes and a more streamlined regulatory policy,” he said.

Sen. Kevin Meyer, co-chair of the Senate Finance Committee, said he thinks Parnell’s overall spending target is “reasonable,” and that lawmakers should end up close to it. But Meyer, R-Anchorage, said it will mean a “much smaller” capital budget compared to recent years.

Parnell has proposed $799 million in unrestricted general fund spending on the capital budget for fiscal year 2014. The Senate, which generally takes the first go at his capital budget proposal, hasn’t unveiled its version of the plan yet and isn’t bound to keep in all Parnell’s proposed projects. Legislative leaders, including Meyer, however, have been trying to temper expectations about its size.

The operating budget is likely to end up in a conference committee. The version of the operating budget that passed the House included about $41 million less in unrestricted general fund spending than the Senate version. That figure, however, includes both the budget that passed the House plus new contract agreements that were included in the Senate bill. Both the House and Senate versions are smaller — overall, and in unrestricted spending — than what Parnell proposed, according to the Legislative Finance Division.

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