The Kenai Peninsula’s three legislators spoke Wednesday to an audience of Kenai and Soldotna Chamber of Commerce members about the legislative session that concluded last month with passage of the smallest state budget in many years.
Speaking alongside his colleagues Representative Mike Chenault (R-Nikiski), and Representative Gary Knopp (R-Kenai), Senator Peter Micciche (R-Soldotna) compared this year’s state budgets — the $4.6 billion to fund state agencies in the operating budget and a $1.4 billion capital budget to fund construction and maintenance projects, including six on the Kenai Peninsula — to those of 2013, the year before global oil prices plummeted, taking state revenues with them. Since 2013, the total budget has been reduced about 46 percent, he said, with this year’s operating budget $1.64 billion less than 2013. Of the $1.4 billion capital budget, most — about $1.18 billion — comes from the federal government. According to Alaska Governor Bill Walker’s office, the capital budget is Alaska’s smallest since 2000.
“Some folks say we haven’t cut,” Micciche said. “The reality of it is, we have. Does that mean we can’t continue to be more efficient and look for opportunities to continue to reduce? We can. But the reductions have been fairly significant. We’ve been consistently lowering the budget for the past few years, and the choices get tougher and tougher. As we pare back to operating core critical government services and root out inefficiencies, we hear from more and more of you about those cuts.”
The possibility of using taxes to fund state government have been debated throughout the recent legislative session and beyond, with Alaska Governor Bill Walker saying in a July interview with the Associated Press that he intends to introduce a tax proposal this year. Micciche said on Wednesday that taxation may be necessary in some future scenario, but that Alaska’s present financial situation isn’t it.
“We are at the point of at least considering what type of revenue might work for Alaskans, if we get to that point, and we are still interested in future economic diversification so we’re not just counting on the revenue of one commodity to fund our government,” Micciche said. “…If we continue to an erosion of savings, or we see a price crash, or again we see a production reduction, then we’re going to have to evaluate — we’re going to have to pay our bills.”
All three legislators said a tax-funded state government is an undesirable outcome, and that it’s plausible for Alaska to continue being funded by oil.
“We’re within $100 million of balancing,” Micciche said of the state budget. “It takes a slight improvement in the price of oil, or a slight improvement of some of those projects that are expected to come online.”
As an alternative to taxation, Chenault mentioned raising state fees — which he said hasn’t been done in his 17 years in the legislature “because we’ve lived off our oil revenue.”
“Unfortunately, the oil revenue doesn’t pay the bill today” Chenault said. “There’s some things on the horizon that we’ve got some hope for. Those aren’t going to happen today or tomorrow.We’d be lucky if some of those things happen in 10 years. We have been increasing the throughput on the (Trans-Alaska Pipeline) and that’s important.”
A specific oil prospect Chenault mentioned is the North Slope’s Smith Bay discovery, which operator Caelus Energy has estimated to hold 6 billion barrels of recoverable oil. Caelus has delayed plans to drill an appraisal well this winter due to low oil prices and the state’s delayed payment of between $75 million and $100 million in cashable tax credits.
Knopp also mentioned a particular oil and gas project he favors — the effort lead by the state-owned Alaska Gasline Development Corporation (AGDC) to build an 807-mile pipeline to carry North Slope natural gas to a liquefaction facility and export terminal in Nikiski.
“I’m probably one of the few in the legislature who still support that,” Knopp said. “I continue to be optimistic on the gas line… I’m going to stay optimistic until the end of the year. I think the end of the year, that’s my deadline. We should have some really progressive reports at that point. There was numerous attempts throughout the legislative session to remove funding from AGDC, but it did remain and we’ll continue to pursue the project, so hopefully we’ll have some good news by the end of the year.” Knopp said the good news he hopes for is a decision for an outside entity to invest in the project.
Governor Bill Walker’s budget proposals were introduced in the legislature’s first meeting on January 18, and both were passed in special sessions after the end of the regular 121 day session — the operating budget on June 22 and the capital budget on July 27. On Wednesday all three legislators said the budget process had been unnecessarily protracted, frustrating and filled with political fights.
Micciche said budget priorities have been used as game-pieces for political objectives — especially so with funding for schools, whose internal budgeting relies on state money that might not be appropriated until after the end of their own budget cycles. Micciche said his office is considering ways to shorten the budgeting process and lessen its potential as a political bargaining tool. One possibility is “looking at some sort of default option if the legislature doesn’t pass a budget by a certain time — we’ll be evaluating the constitutionality of that,” Micciche said. Another possibility may be rules focusing special sessions on single topics.
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