Budget Compromise Prevents Threat of Government ShutdownBy MARY KAUFFMAN
May 31, 2016
Today, the Alaska State Legislature passed HB 256, the Alaska statewide operating budget; HB 257, the mental health operating budget; and SB 138, the capital budget. After a conference committee appointed to address discrepancies in the House and Senate versions of the operating budget bills closed negotiations late last night, the bodies passed a fully funded budget this afternoon, achieving $418 million in budget reductions for FY 2017. In addition to the $777 million in reductions achieved in last year’s operating budget, the 29th Alaska State Legislature has reduced the budget by $1.2 billion over two years. The Conference Committee reports for House Bills 256 & 257, both of which were held over from the 2nd session of the 29th Alaska Legislature, passed the House today on a vote of 34-5 and 38-1 respectively. The FY17 deficit was funded using the Constitutional Budget Reserve. The vote to access the CBR was 35-4. The Conference Committee report for the Operating Budget totals $4.26 billion in unrestricted general funds. The day-to-day portion of the budget is roughly $1.89 billion, a 7.1 percent reduction from FY16’s operations and a 17 percent reduction from FY15. “We’ve heard from our constituents all year that they want a budget under $4.5 billion – this budget comes in significantly under that number. In fact, we are under $4.4 billion for the Operating and Capital Budgets combined,” Finance Co-chair Mark Neuman, R-Su-Valley, said. “There are other actions the House has taken to slow the growth of the budget and shrink the fiscal gap. Medicaid reform and the Criminal Justice legislation are expected to generate significant savings as they are fully implemented. The Conference Committee also approved a fiscal note for $430 million to partially pay the $650 million in oil and gas tax credits already owed using FY16 money. “It is critical that the state of Alaska honor its obligations and pay its debts. It just makes sense to pay FY16 bills with FY16 money. The other option is to pass today’s obligations on to future Alaskans, and we don’t want to see that happen.” Neuman said. “It is important for the people of Alaska to know the size and scope of government has been cut,” said Sen. Pete Kelly (R-Fairbanks), co-chair of the Senate Finance Committee. “As we enter into discussions about revenue, we have fulfilled our promise to first reduce state government.” In response to the state’s $4 billion deficit, the Senate Majority stated in a news release that this budget includes responsible cuts in line with the Senate Majority’s priorities, through major government reforms in the Medicaid system and corrections department, both of which received broad, bipartisan support by both legislative bodies and the administration. “The reforms we are making now will protect our budget reserves into the hundreds of millions of dollars,” Sen. Kelly added. As a part of the budget negotiation process the Senate Majority stated the conference committee reviewed each department and agency, focusing on maximum efficiency of state services. Major reform within the Medicaid system will save the state $500 million over eight years; criminal justice reform will save the state $380 million over the next decade; and power cost equalization fund restructuring and community assistance program fund restructuring will save the state more than $200 million over the next six years. The capital budget includes $130 million in unrestricted and designated general funds, leveraging $1.3 billion in federal match funding and providing Alaska’s communities with state assistance for roads, harbors, energy and deferred maintenance according to the Senate Majority. “This budget addresses the need to cut, the need to invest and the need to compromise,” said Sen. Anna MacKinnon (R-Eagle River), co-chair of the Senate Finance Committee. “It was a bicameral, bipartisan effort to ensure stability, and to avoid pink slips for state employees.” "I voted for the budget deal because I will not be a part of playing on the fear and uncertainty of Alaskans by threatening a government shutdown. These budgets are not perfect but they represent a willingness by our Coalition members to seek bipartisan solutions to protect Alaska's economy," said House Finance Committee member Representative David Guttenberg (D-Fairbanks). "I am especially proud we were able to restore the millions of dollars the Republican Majorities cut from the University of Alaska budget. We need a vibrant University so ideas and innovation can be applied to our great state. This is vital in creating a strong diversified economy." As part of the negotiated budget deal the Alaska Independent Democratic Coalition stated in a news release, all previously cut funding for early learning programs like Pre-K, Parents as Teachers, and Best Beginnings was restored. The budget deal also restores the promised $50 increase to the Base Student Allocation for Alaska’s public school, which was cut at the last-minute by the Republicans in the budget Conference Committee. The compromise budget also restores the budget for the University of Alaska to the level originally proposed by Governor Walker. “We stood strong for public education and were ultimately able to prevent short-sighted and dangerous cuts that would jeopardize the future of our children,” said House Finance Committee member Representative Scott Kawasaki (D-Fairbanks). “It took some time and effort, but we ultimately prevailed and convinced a majority of lawmakers that it’s irresponsible to try and balance the budget by jeopardizing the educational opportunities of Alaskans.” "Passing a budget does not mean our work is done," said AIDC Leader Representative Chris Tuck (D-Anchorage). "Our Coalition wants a comprehensive fiscal plan. That begins with fixing our flawed system of subsidizing the oil industry with hundreds of millions of dollars a year. That will be our number one focus for the remainder of the Special Session." By wrapping up work on the budget, the members of the Alaska Independent Democratic Coalition stated they can now turn their undivided attention to working on the components Governor Walker has identified as key to long-term fiscal sustainability, including reforming the unsustainable system of providing tax credits and incentives to the oil industry. HB 256 & HB 257 now go to the governor for his signature. If Governor Bill Walker does not sign the bills by July 1, the Alaska government will be forced to shut down with the exception of essential life and safety services. Governor Walker has scheduled a press conference for Wednesday at 11 AM concerning the Special Session. It is expected he will announce if he will sign HB 256 & HB 257.
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