• Forecast
  • News Tip
  • Categories
Temperature Precipitation
Estimated read time
5m 31s

Walker administration tries to rein in Alaska’s budget

By KTVA CBS 11 News 1:03 AM December 16, 2014
ANCHORAGE –

Gov. Bill Walker asked business leaders at the Anchorage Chamber of Commerce luncheon Monday for their help in educating the public about the seriousness of the state budget crisis.

The message — delivered after only 15 days in office — was more sobering than alarming.

“Can we completely reduce this down, without dipping into our savings? No,” said Walker. “We cannot cover a $3.5 billion deficit and not hurt our economy. We don’t want to turn our economy into a tailspin. But we want to be honest and forthright about where we are and what it’s going to take to make this state work.”

Walker submitted the 2015-16 operating and capital budget on Monday as required by state law.

He let the operating budget, as submitted by former Gov. Sean Parnell, stand at $5.3 billion, without endorsement. But Walker trimmed Parnell’s capital budget by almost by half, from $220 million down to $106 million.

Among some of the cuts:

  • $45 million: Knik Arm Bridge and Toll Authority
  • $20 million: Susitna-Watana Dam
  • $32 million: Weatherization & Energy Projects
  • $8 million: Ambler Road Project

In recent weeks, oil prices have spiraled downward to below $60 a barrel. State budget analysts say prices will eventually climb again, but they may not make a significant comeback for several years.

The Department of Revenue estimates that the average price of oil will be $76 a barrel in 2015. According to their estimates, it will dip to $66 in 2016 and bounce back to $93 in 2017. When the budget for fiscal year 2014-15 was crafted, oil prices were at least 40 percent higher. Now, the state is expecting a budget deficit of $3.5 billion and another deficit of more than $3 billion in the coming fiscal year.

“We on a self-imposed diet of sorts,” said Marcia Davis, who is a former deputy commissioner for the Department of Revenue and is currently the state’s acting revenue commissioner.

Davis told the chamber the state has time to develop a long-range strategy. Based on an annual operating budget of $5.6 billion, state budget reserves could last for perhaps another eight years, she says.

“What you’ll see is that our statutory and constitutional budget reserves run out approximately between years 2022 and 2023,” said Davis. “We’re not in a ‘sky is falling’ moment, but we certainly have the space and time right now to get our act together.”

Not everyone was reassured at the chamber luncheon. During the question-and-answer period, one man stood up and said, “Two words: Medicaid expansion.”

Walker says his Medicaid expansion plans are on track, and there are signs that it might result in savings for the state. The governor said his administration plans to roll out some numbers in the near future.

There were also concerns about education spending.

Alyse Galvin, one of the organizers of the grassroots group Great Alaska Schools, told Walker she wanted a “temperature reading” on school funding.

“As you know, we are in a fiscal crisis in this state,” said Galvin. “I wanted to know if it’s still something you think of holding sacred.”

Walker said he couldn’t give her any exact numbers about education funding.

“But our priorities have not changed,” said Walker. “We’re going to figure out how we can have the best education available to our students at a cost we can afford.”

For those who track the economy, there was a sense of déjà vu.

Andrew Halcro, who now serves as president of the Anchorage Chamber of Commerce, was a state representative 16 years ago.

“We had a billion-dollar budget deficit and about a year and a half worth of savings left,” said Halcro. “And we were saved, as we had been in the past, by higher oil prices.”

Halcro said the public believes government is always crying wolf, so they don’t realize this current fiscal crisis is very different.

“The challenge now is you have not just lower oil prices but also lower production, which is a double whammy,” said Halcro.

When Halcro was in the Legislature, he said production was at about one million barrels a day. Today, it’s about half that amount.

“I seriously believe that until Alaskans see and feel the pain, nobody’s going to believe the state has a problem,” Halcro said.

Bill Popp, head of the Anchorage Economic Development Corporation, says the challenges Alaska is facing now are issues the state has put off. Popp also said he’s relieved the governor is not calling for drastic budget cuts.

“You’re always concerned that radical decisions come to the forefront before careful and thoughtful decisions are actually developed,” said Popp, who says he was glad to hear the governor plans to use reserves to soften the blow of declining oil prices.

As for lawmakers, who will have to work within the confines of today’s new budget realities, there’s hope the governor will turn crisis into opportunity.

“The state of Alaska is facing a budget deficit of unanticipated magnitude – $3 or 3.5 billion,” said Rep. Mike Hawker, a Republican, who is the incoming Legislative Budget and Audit Committee chairman, as well as a former House Finance Committee chairman.

“The last time we saw a circumstance similar to what it is today is really when I was elected to the legislature back in 2002,” he said. “And yes, very conventional wisdom from the public was, ‘Don’t touch my PFD.’”

But Hawker says the Permanent Fund Dividend needs to be one of the options on the table – either capping it or making it politically possible for the state to use some of the earnings from the fund. He says personal income and sales taxes also need to be considered, adding that, from a personal standpoint, he neither condemns nor endorses any of the options.

In the meantime, the new Walker administration says it’s attempting to cautiously navigate the state’s financial straits while charting a new course.

“In times like we’re in now, we’re forced to be more creative than perhaps at $147 dollars (a barrel),” Walker said. “We’re going to be bold and aggressive on developing Alaska and growing Alaska.”

The administration is reaching out to the public for some of those creative ideas. It says it’s in the process of setting up a system for people to bring solutions forward.

Latest Stories

  • News

    Crash temporarily shuts down Seward Hwy overnight

    by KTVA CBS 11 News on May 27, 23:37

    Last updated at 6:15 a.m. on Sunday, May 28 The Seward Highway was completely closed in both directions for about five hours overnight following a crash at mile 76 near Portage Glacier Road. The crash occurred sometime just before 11 p.m. and the road finally reopened to traffic around 4 a.m. Whittier police were first […]

  • News

    Jet owned by Elvis sold for $430,000 at auction

    by Associated Press on May 27, 19:09

    ALBUQUERQUE, N.M. (AP) – A private jet once owned by Elvis Presley has been auctioned after sitting on a runway in New Mexico for 35 years. GWS Auctions Inc. says the plane sold for $430,000 on Saturday at a California event featuring celebrity memorabilia. The auction house says Elvis designed the interior that has gold-tone […]

  • Politics

    Judge dismisses lawsuit against Clinton by Benghazi families

    by Associated Press on May 27, 19:02

    WASHINGTON (AP) – A federal judge has dismissed a lawsuit against Hillary Clinton filed by the parents of two Americans killed in the U.S. diplomatic compound in Benghazi, Libya. U.S. District Judge Amy Berman Jackson in Washington says the former secretary of state didn’t defame the parents when disputing allegations that she had lied. The […]

  • News

    Remains of Arkansas soldier killed in Colony Glacier plane crash returned home

    by KTVA CBS 11 News on May 27, 18:52

    An Arkansas National Guardsman who was killed in plane crash in Alaska 65 years ago has finally made it home. Staff Sgt. Robert Dale Van Fossen was laid to rest Saturday in Little Rock. Arkansas governor Asa Hutchinson ordered flags lowered to half mast in Van Fossen’s honor. His remains were found among the wreckage of […]

  • News

    Historic planes head to Dutch Harbor to mark 75th anniversary of Aleutians battle

    by Dave Leval on May 27, 18:43

    John Pletcher’s invitation is too good to ignore — a chance for myself to get back in the sky for the first time in a while. It takes his JRF-5 Grumman Goose just seconds to take flight at Anchorage’s Merrill Field, then it’s off to Dutch Harbor, to take part in the 75th anniversary of […]

  • News

    NTSB investigating separate fatal crashes near Fairbanks, Haines

    by KTVA CBS 11 News on May 27, 14:46

    Last updated at 10:30 p.m. on Saturday, May 27 Two people are confirmed dead and one is in critical condition following a fatal plane crash near the small Southeast Alaska community of Haines. Alaska State Troopers (AST) confirmed 29-year-old David Kunat of Juneau and an unnamed adult male passenger from California were killed in the crash. Chan Valentine, […]

  • News

    Feds to gain control over Kuskokwim king salmon management

    by Associated Press on May 27, 12:55

    BETHEL, Alaska (AP) – Starting next month, the management of king salmon on a southwestern Alaska river will transfer from state control to federal. KYUK-AM reports that as of June 12, the U.S. Fish and Wildlife Service will begin to oversee the salmon living on lower and middle Kuskokwim River. Under federal law, the switch is […]

  • Lifestyle

    Gregg Allman of The Allman Brothers Band dies at age 69

    by Associated Press on May 27, 11:53

    SAVANNAH, Ga. (AP) – A publicist for rock legend Gregg Allman says the organist and singer for The Allman Brothers Band has died. He was 69. Ken Weinstein confirmed Saturday that Allman died at his home in Savannah, Georgia. Allman had cancelled some 2016 tour dates for health reasons. In March 2017, he canceled performances […]