Parnell budget vetoes due in next 2 weeks

SURPLUS: Despite record high spending, some call for reductions.

June 18, 2011 

Gov. Sean Parnell is expected to veto $400 million from the state budget in less than two weeks, and mayors, legislators and other advocates are scrambling to protect their stuff from the ax.

"We're getting, as you can imagine, a lot of correspondence from everywhere. From organizations, communities and individuals," said Karen Rehfeld, the governor's budget director.

Whether it be money for roads, parks, energy projects, or a new sports arena at the University of Alaska Anchorage, advocates are making their case, trying to show why a particular item is needed and more than just a provincial pet project.

"Even though this project line item has the word 'Homer' on it, it is very important to recognize that this is a regional project that will bring benefits to the entire southern Kenai Peninsula," said one such letter, written to Parnell by Homer City Manager Walt Wrede, in support of an appropriation for a natural gas pipeline project in the area.

Parnell will be making his vetoes by the end of the fiscal year on June 30. He's signaled the scope of the cuts but not what they'll be.

Sen. Bert Stedman, the main architect of the Senate version of the budget, said his view is that the need to put state dollars into the Alaska economy should trump what he calls political sound bites about cutting spending.

"Clearly the U.S. economy is slowing down ... those slowdowns ripple back to Alaska," the Sitka Republican said. "What we need to do is put work on the street and keep our state economic activity moving forward while the rest of the southern 48 flounders in this quandary of a weak economy."

The state is enjoying a huge budget surplus at the moment because of high oil prices. But Parnell argues the state can't afford to be spending this much with the continuing decline in oil production, which provides almost 90 percent of state general fund revenue.

Even Stedman said the final version of the budget ended up bigger than he's comfortable with. The Legislature's spending reached historic levels this year, and Rehfeld said the administration has also been hearing from those who want cuts. The capital budget, which has money for everything from ports to the Great Alaska Shootout basketball tournament, is between $3.2 billion and $4 billion, depending on how you count it. That's where Parnell is looking to cut. He's said vetoes are also possible in the $12 billion operating budget, which pays for education, health care and other services the state provides.

House Majority Leader Alan Austerman wrote on his website that "a lot of people in the state right now are standing with breath held."

Austerman suggested Parnell is likely thinking about vetoing big ticket items. One possibility, he said, is the $220 million the Legislature put in to help do work toward a possible small-diameter natural gas pipeline from the North Slope to Southcentral Alaska. It's far more than the $5.5 million that Parnell requested for the effort to bring gas to in-state users.

Another potential target is $100 million in home energy rebate and weatherization money, four times the amount that Parnell asked for.

"Governor Parnell isn't likely to cut $400 million out of the budget by slashing small items, like $50,000 for some project design work, or $30,000 for some new heavy machinery in a village," according to Austerman. "In general, Alaska governors have honored legislative intent for these smaller projects, recognizing that legislators are closer to the needs of their communities than the governor and his budget analysts can be."

Advocates, are working out the best way to protect their projects. Anchorage Mayor Dan Sullivan said a couple of weeks ago that he would help Parnell sort through which road projects might be ready and which of them could wait.

But this week he said the city had decided not to give the governor a prioritized list, which Parnell could use to decide which Anchorage projects he would cut. "We support them all," Sullivan said.

Sullivan spokeswoman Lindsey Spinelli expounded on that, saying "the mayor has reviewed all road projects in Anchorage and determined all appropriations made by the Legislature in the capital budget are welcome and needed."

Parnell budget director Rehfeld said the administration is looking favorably on appropriations that represent the final installment needed to actually build something, as opposed to just being one step of a project. Rehfeld said another consideration is if the state spending would bring matching funds from the federal government that are designed for that project.

"Or are there things that can just wait? For the most part I think the projects that are in the budget are good projects," Rehfeld said. "But are there things that can be either phased or delayed. Do they all have to be done today?"


Reach Sean Cockerham at scockerham@adn.com or 257-4344. Daily News reporter Rosemary Shinohara contributed to this story.

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