Surplus, capital spending could produce debate

Posted: Monday, December 19, 2005

Legislatures serving other states can only dream of the dilemma facing Alaska’s lawmakers: How to spend a $1 billion surplus that sustained elevated petroleum prices have delivered into their hands.

Opening day is just weeks away, and Kenai Peninsula state lawmakers are gearing up to answer that and other burning questions in what promises to be a lively second session of the 24th Legislature.

Rep. Mike Chenault, R-Nikiski, co-chair of the House Finance Committee, said divvying up the surplus would be a battle between competing interests and priorities.

“The question is whether to save it, and if so, how much?” he said. “Should there be more money for education? OK, what do we do with what’s left over? Capital projects?”

Rep. Kurt Olson, R-Soldotna, agreed the surplus question would be a political hot potato.

“We need to look at it as if it’s the only surplus we will see for the next few years,” he said, adding that estimates of its size have been floating between $900 million and $1.5 billion. “The demands on the surplus are going to be incredible. I just hope we have the backbone to put some of it in the bank,” he said.

Ideas for spending it abound. Some of the surplus could be used to address the looming debt in government-worker retirement programs.

“There’s an option of putting money into the Teachers Retirement System (TRS) portion of the retirement liability issue,” Chenault said. “It would help keep the education budget from ballooning every year.”

The Public Employee Retirement System, or PERS, which covers most other government workers, is the other half of the one-two punch facing lawmakers. Chenault said about 30 percent of that is covered by federal money, and surplus funds may not have to go there.

Recent one-time budget expenditures aimed at easing the PERS/TRS debts of local municipalities have slowed the hemorrhaging, Olson said, but “didn’t do anything about the $6 billion debt we’ll see over the next 25 years.”

It’s a debt that must be paid. The House Ways and Means Committee is wrestling with the PERS/TRS issues and is preparing a report expected in January.

Next year is an election year. Ten Senate seats and all 40 House seats are up for grabs. Resisting the impulse to boost capital appropriations to pet district projects may prove difficult, Chenault said.

Funding too many jobs too fast could spread the labor pool, resulting in excessive overtime and a greater need for importing workers from Outside, ultimately driving up the cost of projects unnecessarily, he said.

“I hope people will look back and see we spent about $386 million on capital projects last year,” Chenault said.

Rep. Paul Seaton, R-Homer, said he favors a cautious approach to capital spending that focuses on fixing things we already have.

“We are facing real decisions on infrastructure maintenance versus funding new projects,” he said. “I think, for instance, we need to take care of the STIP (State Transportation Improvement Program) list projects before going into new projects.”

Election-year pressure to spend capital money is hardly a new phenomenon, but reducing debt and future deficit have more appeal than bringing home the bacon in new capital projects, at least for him, Seaton said.

Another idea being discussed is putting money back into the Constitutional Budget Reserve. The state’s rainy-day account has been drained in recent years to balance annual state budgets.

“We need to repay a portion to the CBR and get it built back up,” he said.

Seaton was somewhat critical of that option, arguing it wouldn’t save the money, only make it a little harder to spend. It would take a supermajority of both houses to pull money out for general fund spending.

Lawmakers also could find themselves in a fight over the school area-cost differential formula, the method used to distribute state money to school districts. The Kenai Peninsula Borough School District, and others as well, claims it is suffering under the existing program.

“It’s been inequitable for too many years, and some districts are getting further behind,” Seaton said. “Hopefully, we can get some political compromises in the end so we can move forward.”

As legislative sessions approach, lawmakers often attempt a jumpstart by pre-filing bills.

Chenault has not yet done so, but said he had some “in the works,” including one concerning certain aspects of explosives handling. He declined to comment on its specifics until it is pre-filed. Likewise, Olson has not pre-filed any bills, though he anticipates submitting some legislation early in the session. He also declined to discuss them at this time.

Seaton said he was preparing a bill to retain the state’s existing mixing zone standards and encode them in statute. He isn’t supporting proposals currently under consideration by the Department of Environmental Conservation that could result in pollution permits in rivers and streams where none is allowed now.

He also will push his House Bill 25, a measure that aims to return more fish tax revenue to the areas in which it is generated.

High on the list of interests being expressed by local governments is state financial aid to communities. Seaton said there were “real possibilities” that some kind of municipal revenue sharing would be passed, perhaps using the Amerada Hess money now in the Alaska Permanent Fund account.

The Legislature should avoid “one-time money” in favor of a sustainable program of funding aid to financially strapped boroughs, cities and towns, he said.

All three House members are taking a keen interest in a future gas line project, saying they won’t accept a deal without a spur line.

“All of us are on record wanting gas for Southcentral,” Olson said.

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