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Parnell says state will see $2.2 billion budget surplus this year

Posted: Thursday, February 11, 2010

Gov. Sean Parnell had a pleasant surprise for legislators in Juneau Feb. 2: A $2.2 billion state budget surplus.

That's up $700 million from $1.5 billion estimated as a surplus for the current fiscal year of 2010 that was projected two months ago by the state Department of Revenue.

Oil prices are now higher and Parnell asked the revenue department to update its forecast as the governor prepared his fiscal 2010 supplemental appropriation request to the Legislature.

Parnell proposes to tie up most of the surplus in state savings accounts, a move aimed possibly at preventing the Legislature from spending it, but he would also use $100 million to accelerate a major maintenance program on public buildings around the state, including schools.

Parnell would deposit $1.1 billion of the surplus into a state savings account that is used to "forward fund" education, and deposit $402 million into the constitutional budget reserve.

Both deposits are "repayments," the governor said. The Legislature tapped the education fund last year when oil revenues sagged, and the deposit this year would bring it back to a $1 billion level.

The $403 million deposit in the constitutional budget reserve is the final repayment of funds borrowed from the reserve fund in prior years to finance deficit budgets, the governor said.

Under state law, funds taken out of the CBR must be repaid at some point, and the pace of repayments has been slow. The Legislature has appropriated about $5.5 billion from the reserve over several years.

legislative leaders voiced support for Parnell's proposals.

"Education forward-funding and payback of the remaining debt to the constitutional budget reserve are extremely wise uses of our limited windfall," said House Speaker Mike Chenault, R-Kenai.

Education forward funding involves keeping a reserve on hand sufficient to fund the state school foundation program for a year. The program distributes money to schools around the state.

School districts have to plan their budgets and hire teachers in the spring and previously were never sure of the amount of funding available until well into the summer, waiting until the Legislature and the governor approved the state budgets. Knowing the money is available in a reserve fund allows school officials to plan budgets with more certainty.

When oil prices plunged last year, however, legislators tapped the $1 billion fund. Now that prices are up again, restoring the fund to its previous balance has wide support.

The state overall has a healthy balance sheet, worth more than $10 billion in various reserve accounts not including the Alaska Permanent Fund with it's market value of about $30 billion.

Parnell also proposes to spend $100 million on major maintenance projects as the first part of a $500 million program to tackle deferred maintenance on public buildings.

The $100 million was originally part of Parnell's fiscal 2011 budget, but the governor decided to move it into the current year supplemental request to speed things up and get more construction money on the streets this year.

Parnell asked legislators to approve the appropriation by March 1.

"I am asking the Legislature to approve these funds quickly so that state agencies can start the process of secure contractors now, rather than waiting for the beginning of the fiscal year on July 1," Parnell said. "Given the loss of jobs in Alaska's construction sector in 2009, it is important to get these projects to contractors as soon as possible."

Sen. Bert Stedman, R-Sitka, co-chair of the Senate Finance Committee, said he views Parnell's deferred maintenance plan favorable and would try to move it through his committee quickly.

"We may not make it by March 1, but we shouldn't take much longer," Stedman said in a briefing.

Sen. Lyman Hoffman, D-Bethel, who co-chairs the Senate Finance Committee with Stedman, said the maintenance program should include a major component of energy efficiency improvements for schools.

"This will allow these schools to reduce their heating bills and put more money into the classroom,"Hoffman said.

The state and university have about 2,300 buildings statewide with an estimated $1.9 billion in maintenance projects that have been deferred over the years.

Work that is needed includes upgrades to electrical and heating systems, replacement of leaking roofs and installation of insulation and new plumbing. The supplemental appropriations will also cover transportation, including highways, aviation and ferries, Parnell said. The program will include road surface repairs, guardrails, culverts, bridges, harbors and terminals.

The maintenance program is widely supported in the construction industry, by organizations such as the Associated General Contractors' Alaska chapter, which has made maintenance its top legislative priority.

The projects will stimulate work on buildings, which has lagged in the past two years in contrast to highway-related work, which is supported by federal transportation funds, AGC Alaska executive director John McKinnon has said.

Find more coverage of the legislature at www.alaskalegislature.com.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.



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