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Senate passes capital budget

Posted: April 12, 2014 - 7:42pm

JUNEAU — The state Senate passed a $2.2 billion state capital budget Friday, along with a bill to raise the borrowing limit of the Alaska Municipal Bond Bank Authority as part of an overall package to help build a new heat and power plant at the University of Alaska Fairbanks.

Reconsideration was served on the budget, meaning it could be voted on again before going to the House. Friday’s vote was 19-1, with Sen. Bill Wielechowski, D-Anchorage, voting against.

Wielechowski said he didn’t think the budget had sufficient regional balance and that the amount for Anchorage should have been higher. Other lawmakers defended the budget as fair and reasonable, given the state’s budget situation.

Senate Finance Committee co-chair Kevin Meyer said he thought members had done a good job of trying to limit spending while also addressing critical needs in the state. He said the budget was in line with certain goals, like finishing projects the state has started — such as the state library, archives and museum in Juneau and the engineering building at the University of Alaska Anchorage — and maintaining state assets with $90 million for deferred maintenance. The budget also included funding for things such as energy projects, roads, school construction and improvements or repairs for shelters for victims of domestic violence.

The budget total was slightly higher than what was reported when the bill left the Senate Finance Committee. Materials provided with the bill at that time weren’t completely reflective of updated totals

Capital funding in the package crafted by the Senate is about $110 million less overall than that approved by lawmakers last session, according to information provided by the Legislative Finance Division.

Lois Epstein, Arctic program director for The Wilderness Society, said in a statement that it was now up to the House to “show real fiscal restraint” and eliminate continued funding toward what she called low-priority mega-projects, like the Knik Arm bridge, Ambler mining access road and Juneau access road.

The budget reflected a $245 million financing package for the heat and power plant at the University of Alaska Fairbanks. That amount includes state funds, including funds that otherwise could have gone toward finishing an engineering building on that campus, and $157.5 million in anticipated bond revenue. Meyer has said he was persuaded by university officials and co-chair Pete Kelly, R-Fairbanks, that a greater need for UAF at this point was the plant. Money was included in the budget to enclose the engineering building, allowing it to be set aside until the power plant was finished, Meyer said.

As currently envisioned, part of the bonding for the new power plant would come through the municipal bond bank authority.

The budget includes intent language that the University of Alaska implement a utility surcharge or raise tuition in an amount not to exceed annual revenue of $2 million. According to the intent language, that funding and the fuel savings resulting from construction of a new plant would be used to offset university revenue bond debt service for the plant.

Minority Democrats proposed removing that language, raising concerns about the effect being felt by students on other UA campuses. Sen. Johnny Ellis, D-Anchorage, said he had heard from students asking him to prevent unreasonable tuition increases. Meyer, R-Anchorage, said the decision on how to move forward would be left to the board of regents. He said if students have to pay something, they might think twice about leaving a door or window open. Meyer said fuel surcharges are not unusual.

The amendment was defeated.

In debate on the bond bank bill, Meyer said while the project isn’t cheap, the cost won’t get any cheaper if the project is put off. The bill carried a fiscal note of $7 million a year for debt service, but Meyer said that amount could be lower and revenue from a tuition increase or surcharge also would be used to offset that.

The plant, which provides electricity and steam heat to 3.1 million square feet of public facilities on campus, came online in 1964. The university has warned that if all or parts of the plant were to fail, the consequences would be “financially devastating.”

Kelly said it is hard to find parts anymore for the plant and that this is a significant need that he did not think could be avoided.

Senate Minority Leader Hollis French, D-Anchorage, called it a big project to swallow nonetheless.

He and Ellis voted against, but that bill, too, could be voted on again because reconsideration was served.

Online:

SB119, capital budget: http://bit.ly/1fXF5Xl

SB218, bond bank bill: http://bit.ly/OG1EVH

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