Peninsula lawmakers predict governor’s proposal will change

Budget battle set

Posted: Sunday, January 15, 2006

Gov. Frank Murkowski’s ambitious agenda outlined in his State of the Budget address before the Legislature on Thursday is likely undergo significant alteration by the time lawmakers vote on a fiscal year 2007 spending bill in May, members of Kenai Peninsula’s legislative contingent said Friday morning.

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  Mike Chenault

“The final budget will be considerably different,” Rep. Kurt Olson, R-Kenai, said.


Mike Chenault

“The real pause (it gave me) was the amount of money he proposed be spent,” Rep. Mike Chenault, R-Nikiski, said. “Our intention is to look at a more sustainable budget that can run over the long term.”

The governor has proposed $491 million in additional operating budget spending over the current budget, much of it covering increases in unavoidable obligations — scheduled salary increases, high Medicaid costs and the like.

Central to his address, however, was how he hopes to divvy up the estimated $1.2 billion revenue surplus from the current elevated oil prices. Among other things, he has proposed diverting $565 million to the state’s public education fund, saving $400 million in anticipation of buying a 20 percent equity share of the future natural gas pipeline, and spending $86 million on his transportation agenda, including Knik Arm and Gravina Island bridges, projects that could see capital budget appropriations of $94 million and $91 million, respectively.


Kurt Olson

Peninsula legislators said they were struck by the absence of a proposal to save a portion of the surplus, something they have repeatedly said they favor.

“Mike (Chenault), I and Tom (Wagoner) have all worked for ourselves,” Olson said. “We’ve had employees and met payroll. We’ve all had good years and bad years. We know there’s not always enough money to bail you out.”

As for the governor’s $400 million for the gas pipeline, Wagoner said he would prefer to see that money encumbered — that is, designated in some fashion for the pipeline, but placed in a saving account for the time being. Spending it, Wagoner added, should require the governor to present the Legislature with a concrete, detailed pipeline deal.

Chenault said it was too early and lawmakers had too little information about a possible negotiated pipeline deal to measure whether the possible rewards outweigh the inherent risks of being a minority owner.

Olson said lawmakers want to see details of a pipeline construction deal before making up their minds. Olson is one of about a dozen lawmakers who signed confidentiality agreements and have been given periodic updates on the negotiations between major producers and the Murkowski administration concerning a future gas pipeline.

“But we haven’t had an update since early December,” Olson said.

Murkowski also proposed acquiring ownership in the Trans-Alaska Pipeline System (TAPS) equivalent to its 12.5 percent royalty oil — oil that moves through the pipeline for which the state pays a tariff to TAPS. The governor said ownership would likely reduce the kind of costly and more or less continuous litigation the state has been involved in with owners over tariff disputes.

“That’s new to us,” Chenault said. “Does the idea have merit? It’s possible. I believe that if we would have been involved in the TAPS line back in its original construction days, we would be billions ahead today. It gives you a seat at the table when tariffs are negotiated.”


Tom Wagoner

The governor has proposed increases to education spending — boosting public school and university spending by about $109 million, including about $90 million for kindergarten through 12th grades. The $565 million in surplus funds he wants transferred to the education account would be used to cover about 60 percent of the roughly $900 million K-12 education will cost overall in 2007. The difference would come from fiscal year 2007 operating budget revenues.

The $90 million K-12 increase within that $900 million drew comments from peninsula lawmakers.

“I like that number,” Chenault said. “But there was nothing in there for the cost differential.”

Kenai Peninsula Borough School District officials have complained for years that the district has been shortchanged by the formula used to split up state education funding based on area cost differentials.

The legislative contingent did find some things to like in the proposed spending plan. Wagoner noted the budget would include another judge for the peninsula court system as well as an additional $8 million (bringing the total to $19 million) for reconstruction and widening of Kalifornsky Beach Road.

While many issues raised by the governor are expected to result in broad discussion and debate among state lawmakers, a couple could be major sticking points. The impact funding for the Knik Arm and Gravina bridges might have on other state transportation projects is a case in point.

Moving to save a portion of the surplus is likely to find broad favor among legislators, and that would mean opposition to some of the governor’s spending proposals, Olson said.

“I think we are seeing support from both parties to save money. The differences will be over where and how to spend the rest,” he said.

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