Operating Budget
The Legislature has agreed to spend approximately $6.1 billion in General Fund dollars for the state operating budget in the fiscal year starting July 1, 2015, which is the FY16 budget year. Key issues were settled by agreeing to fund education at the full Base Student Allocation amount of $5,880 per student, and funding negotiated pay raises to members of state unions. State ferry funding was also added (But is not expected to go towards service in Southeast). All operating budget issues will be back before the Legislature for the FY17 budget in seven months when the next session starts.
With only about $3.1 billion in General Fund revenue expected for the FY16 fiscal year there is a projected shortfall of $3 billion. There is also a shortfall in the current FY15 fiscal year budget of an additional $3 billion. This means we have to take $6 billion from savings to make payroll and fund programs for just these two budget years (This gets us to July 1, 2016).
State general fund operating budget reductions for FY16 total $144 million or 2.7% compared to the previous fiscal year. With an expected $200 million-a-year in automatic increases built into our annual operating budgets from growth in formula programs, reductions of the size made in FY16 are nowhere near the level necessary to fill our budget gap.
At this rate, savings in the statutory and constitutional budget reserve accounts will be completely wiped out in 2-3 years which leaves the State unable to make payroll. This is not a problem that can be fixed with finding efficiencies. The State needs to fundamentally reduce its scope of operations and create a smaller operating structure going forward. If we don’t, the costs of state government will fall on Alaskans and their families.
Upwards of $18 billion in state savings were built up a few years ago when I was co-chair of Senate Finance. I am personally disappointed that virtually no amount from our savings will go towards infrastructure needs of our district and the state for the foreseeable future. It appears our $18 billion in savings will be completely liquidated over the next 2-3 years to pay for operating budgets.
We should review and amend our hydrocarbon fiscal structure to make sure both state and industry receive a fair share at all price levels. This work must be done fairly quickly. At the rate we are burning through our savings accounts, the state will soon be out of savings except for the Permanent Fund. Alternatives then will be significant use of the Permanent Fund earnings or new taxes on Alaska families. We should make every effort to reduce our operating costs and get a fair return for our hydrocarbons over varying price ranges before turning to either the Permanent Fund or Alaskans wallets.
Capital Budget
Unlike the operating budget struggles, the capital budget was done months ago. That’s the good news. Below is a list of projects in the capital budget for Senate District R. The bad news for many communities is the lack of state general funds for projects. A trend that will continue until our budget deficits are fixed.
Interim
Our fiscal situation means every state and federal dollar for capital improvements counts more than ever. My staff will be working the interim with communities and project sponsors to identify existing projects and assist in making sure the projects are timely constructed so they are not lost.
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