General fund budget is $5.6 billion, down $1.3 billion from the current fiscal year
ANCHORAGE - Despite some of the troubling news, Gov. Sean Parnell was upbeat as he rolled out his 2015 spending plan Thursday before the Anchorage Chamber of Commerce — an audience that generally supports cutting funds.
The state’s budget cycle runs from July 2014 to June 2015.
Parnell told chamber members his general fund budget is $5.6 billion, down $1.3 billion from the current fiscal year. The total budget, if you include the Permanent Fund, federal money and other funds, is at $12.4 billion. It was $12.8 billion a year ago.
Aside from a smaller budget, Parnell is projecting a $1.1 billion deficit. However, he told the chamber there’s no reason to panic because he will use a mix of cuts and budget reserves to help guide the state through leaner times.
The governor said he will find savings by trimming 150 jobs. The good news is those positions have gone unfilled, so they will cause relatively little pain. He also wants to pay down pension fund debt by drawing $3 billion from savings. This would lower the state’s annual payment.
At a news conference at his Anchorage office, Parnell chastised reporters for not understanding the importance of this proposal, which he announced earlier this month.
“I think you have underplayed the historic opportunity that we have of working across the aisle here with the pension obligation,” Parnell said. “It would be akin to Congress and the president making the Social Security system sustainable over time. From a state’s standpoint, this is about as significant as it gets.”
Democrats support the concept. In fact, they’ve suggested it before. But they worry about rapidly shrinking budget reserves, they said.
If you add the $2 billion shortfall for the current fiscal year, $1 billion for next year and $3 billion for the pension fund payout, this would amount to about $6 billion in reserves needed to cover deficit spending.
This could be the biggest draw on reserves in the state’s history, said Sen. Hollis French, (D) Anchorage.
“I think we’ve got a long-range crisis coming,” French said.
Republicans look at it differently.
“I give the governor high marks because he’s looking long term,” said senate majority leader John Coghill, (R) North Pole. “He’s looking at how we make sure our budgets are sustainable into the future, knowing full well we’re not going to turn around our oil flow, but we can slow the decline.”
Democrats found irony in the governor’s eagerness to tap reserves. They credit the old tax structure under ACES, Alaska’s Clear and Equitable Share, for helping to grow the state’s budget reserves to $17 billion. ACES is designed to capitalize on high oil prices, and Democrats claim the new tax structure under SB 21 — one that the governor fought for — won’t be able to replenish reserves.
In spite of a smaller budget, the governor found a way to increase funding for public safety. He added $3.4 million for 15 new Village Public Safety Officers and one Alaska State Trooper. Education funding remained relatively flat, although the governor included $5 million for a digital teaching initiative.
Democrats want the governor to raise the education funding formula to help school districts struggling with increased costs, deficits and teacher lay-offs, they said.
“What’s happening to kids in this budget is not good — losing teachers, losing education opportunities,” said Rep. Les Gara, (D) Anchorage, a member of the House Finance Committee.
Gara also said he was disappointed the governor did not implement recommendations from the state’s own child abuse prevention study.
“That’s a problem,” Gara said. “That’s bad for kids.”
But the senate majority leader doesn’t believe increasing funding for schools will help.
“We’re looking for policy solutions as well as dollar solutions,” Coghill said, who believes the governor is of the same mind. “I can tell you we can’t keep doing it the same old way.”
The spending plan for the 2015 fiscal year is the governor’s fifth budget, one he believes has benefitted from the experience of his commissioners and staff, who have learned to find inefficiencies. The governor also gave credit to the Republican majority for backing him in his efforts to cut the budget.
Democrats said the governor is in deep denial about the decline in state revenues, which they believe will be exacerbated by the demise of ACES and the implementation of SB 21, which they are attempting to repeal.
The August primary referendum guarantees that the merits of the two tax structures will continue to be in the backdrop, as lawmakers begin to tackle the governor’s spending plan.