Knowles proposes $145 million budget increase

Posted: Sunday, December 17, 2000

JUNEAU -- Gov. Tony Knowles unveiled his proposed fiscal year 2002 budget Friday, a plan to spend $145 million more to shore up education, strengthen law enforcement, protect public health and lay the groundwork for a natural gas pipeline.

Knowles titled the document the ''Jobs and Families Budget'' and said it's a cost-effective way to meet the needs of Alaska's growing population and economy.

''This budget addresses three basic goals necessary for the continued good health of Alaska families and of Alaska's economy,'' Knowles said. ''You can't have a thriving family without a good job, so this budget is designed to keep both healthy.''

Knowles' budget would increase state general fund spending by 6 percent to $2.41 billion in the 2002 fiscal year, which begins July 1.

Incoming Senate Finance Committee Co-chairman Pete Kelly, R-Fairbanks, and other Republicans reacted cautiously to Knowles' announcement.

''I'm not that critical of it because I haven't had time to examine it in any detail,'' Kelly said.

Over the previous five budget cycles, Republicans had a stated goal of cutting $250 million in state general fund spending. Adding $145 million ''makes me take a deep breath,'' Kelly said, but the time is right for a reassessment.

''Now we'll be looking at it more in a focused way to see what the needs are,'' Kelly said.

Rep. John Harris, R-Valdez, said legislators will start with the current budget and consider whether additions are worthy. He said he's also waiting to see whether the state will earn a surplus this year.

''I think it's much too early to give a broad perspective on the budget,'' he said.

Knowles said about $80 million of the $145 million increase would ''annualize'' expenditures begun after the start of the current fiscal year, pay off bonds, replace one-time sources of money that have been exhausted, and accommodate increasing program caseloads, such as in Medicaid.

Knowles said the other $65 million would pay for improvements in public schools, the University of Alaska, criminal justice and child protection, public health and Pioneers Homes.

The new spending would be covered by a $530 million withdrawal from the Constitutional Budget Reserve, the state savings account used to plug the difference between state spending and state oil-related earnings.

The Department of Revenue this week predicted the average annual price of oil will fall to $24.28 per barrel next fiscal year, necessitating a dip into the savings account to pay for state services.

Knowles said total spending would increase by $286 million to $7.23 billion. That includes nearly $2 billion in federal funds and $1.9 billion to pay Alaska Permanent Fund dividends and to inflation-proof the fund.

Knowles' capital budget calls for spending nearly $1.2 billion to fund highway, airport, and sewer and water projects, mostly with federal money but with just more than $100 million in state general fund money.

Kelly, who will oversee capital budget deliberations on the Senate side, said he would have liked to have seen a larger capital budget.

''It's important that we continue to grow the state, and that's where it happens,'' Kelly said.

He said the capital budget has suffered more over the last five years than the operating budget and that most of it has been used to match federal grants.

''We haven't been able to attach our vision to the capital budget,'' he said.

Knowles said his budget reflects $1,689 less in adjusted per capita spending than the state budget for fiscal year 1979, the last before the oil boom. For example, while the population has increased 50 percent in 25 years, the number of state troopers has dropped by 100 in that time, he said. He proposes adding 10 troopers, 10 Fish and Wildlife Protection troopers, and 20 more village public safety officers.

The governor said he knows the budget will get careful scrutiny from the Republican majority in the Legislature.

''It's my job to look at priorities on a statewide arena,'' he said. ''To meet the healthy skepticism that the Legislature will have, there has to be broad public support for this effort.''

Sen. Kim Elton, D-Juneau, noted Knowles' proposed spending increases for education and alcohol treatment programs and said he welcomed the investment in human infrastructure.

''This is beginning to bring some balance back'' after the five-year Republican plan, he said.

Rep. Bill Hudson, R-Juneau, said the majority will stick with a results-based budgeting process that will make the administration justify not only proposed new spending but previous spending increases that have been approved.

''That doesn't have to be contentious,'' he said. ''(But) the governor will not get everything he asks for. That's just an inevitability.'

Knowles said his State of the State address will repeat his call for new taxes as part of a long-range solution to the budget gap, although he said he has not decided how specific he will be this time.

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