JUNEAU, Alaska — There’s big question as the Legislature convenes Tuesday: How low will oil prices go?
Plunging prices have contributed to massive budget deficits that cuts alone can’t erase. Alaska has billions of dollars in its constitutional budget reserve, but oil prices and spending will dictate how long that cushion lasts.
Here are five things to watch for over the next 90 days:
It’s the top priority of leaders who have spent the past month or so warning of rough times ahead. Many lawmakers aren’t expecting much in the capital budget beyond the federal-match projects generally found in the placeholder budget put out by Gov. Bill Walker two weeks after he was sworn in. Walker is scheduled to address the budget situation in a special speech Thursday night.
The size of the budget hole is unprecedented, according to Legislative Finance Director David Teal. The current year deficit is estimated at $3.5 billion, up $2.1 billion from May, when the 2015 budget was signed. Next year’s deficit is forecast to be comparable.
A number of lawmakers want to focus this session on cuts, prioritizing spending and looking at ways to deliver services more efficiently or differently. Incoming Senate Democratic Leader Berta Gardner said she will consider it a win if education, a major driver of the state’s operating budget, isn’t cut. But she said the way education is funded is open to change, including taking a look at the current per-pupil funding formula.
Alaska doesn’t have a state sales or personal income tax, and Sen. Peter Micciche, R-Soldotna, said he’d like to keep it that way.
“In order to do that, we have two choices, and that is to cut services or ask Alaskans how they want to pay for those services that are outside of our core constitutional responsibility as a state,” he said.
MEDICAID EXPANSION: This is likely to come up as part of the budget debate. As a candidate, Walker pledged to expand Medicaid coverage in Alaska if elected. Medicaid is a program that helps cover health care cost for lower-income people and, like education, is a major budget driver. Walker’s health commissioner, Valerie Davidson, sees expanded coverage as an important investment in the health care of Alaskans and a catalyst for reforming the system to ensure it’s sustainable.
The feds are expected to cover the full cost of expansion through 2016 and the bulk of costs indefinitely, with the state contributing.
This will be Walker’s first session in office and his relationship with the GOP-led Legislature will be watched.
He defeated Republican incumbent Sean Parnell in November. Walker changed his party affiliation from Republican to undeclared in joining forces with Democrat Byron Mallott as part of an “Alaska first” unity ticket. The state Democratic Party has lauded Walker, and Democrats see in him a partner. Walker’s shakeup of the board of the Alaska Gasline Development Corp. riled some Republican lawmakers. But GOP legislative leaders say they’re willing to work with Walker’s administration.
Lawmakers will have to sign off on Walker’s new appointments, including new members of the Cabinet and those he picks to fill the three empty gas line board seats.
Questions about the state’s handling of sexual assault and other allegations of misconduct within the Alaska National Guard overshadowed last year’s gubernatorial race. The Walker administration plans to hire a special investigator to look into the issue. Legislative hearings are also expected.
Voters in November approved legalizing recreational use of marijuana by those 21 and older. Pot consumption becomes legal Feb. 24, but the state has another nine months after that to come up with regulations for the sale of marijuana. Proposals dealing with who oversees the regulation of the industry and the location of shops should get scrutiny this session.