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Parnell proposes $12.8 billion state budget for Alaska

Loren Holmes photo

Similar to last year, Alaska Gov. Sean Parnell's proposed $12.8 billion budget for 2014 calls for fiscal restraint, released under the banner of “responsible and responsive.”

“With declining [oil] production and revenue we have to be smarter with the people's money,” Parnell told guests at Friday's Chamber of Commerce luncheon in downtown Anchorage, where he first revealed his proposed budget for 2014. Because of lower production and lower oil prices, Parnell told the crowd the state is projected to lose $1.6 billion in revenue over this fiscal year and next.

A year ago, Parnell requested a $12.1 billion budget. By the end of the 2012 legislative session -- after $66.6 million in spending that was vetoed by the governor and additions by the Alaska Legislature -- the final 2013 budget was $13.2 billion, including money from the Alaska Permanent Fund. By contrast, the request for 2014 is $12.8 billion. Parnell, though, is touting what he calls $1.1 billion in savings if you only compare unrestricted general funds between the two years. However, add in federal funds, designated funds and the permanent fund, and the differential narrows.

Parnell said he allowed “wiggle room” in last year's budget of about $600 million, dollars elected state senators and representatives vied for as they set their own priorities last spring. For 2014, he's left $500 million of wiggle room.

The Achilles heel – it can be called that – of Parnell's time in office since his appoint as governor in 2009 and his election in 2010 has been the state's contentious and as-of-yet unresolved solution to Alaska's oil tax dilemma. Parnell believes lower, stable taxes will foster investment in new development and, by extension, increased flow of oil through the trans-Alaska pipeline. Critics of this philosophy have warned it is little more than a giveaway with no enforceable assurances that the oil producers will deliver on their promise to sink the dollars they save in taxes back into the state of Alaska.

The next legislative session may hold more promise for the governor's policy goals. His 2012 legislative nemesis – the Democrat-led bipartisan Senate coalition – died in the November election, when Republicans won enough seats to secure a majority. Many of those same Republicans expressed alignment with the governor's agenda during their campaigns.

“You can be sure that we are not done discussing how to boost production of oil,” Parnell said during his noon-time presentation Friday

Looming in the midst of the debate is the prospect of a natural gas pipeline to move Alaska's abundant natural gas reserves from the North Slope to market. Under the Parnell administration, a Canadian company and Alaska's Big Three oil giants are supposedly “in alignment,” working together to make a pipeline more than a pipe dream. TransCanada is the license holder on the project, eligible for up to $500 million of reimbursed expenses under a cost-inducement perk in the Alaska Gasline Inducement Act (AGIA). Exxon Mobil Corp., BP and ConocoPhillips are the oil producers who need the pipeline in order to transport hydrocarbons to far-away buyers.

The new project intends for a pipeline to stretch from the North Slope to tidewater, where a liquified natural gas plant will prepare the gas for tanker shipments. Estimates from the quartet behind the project have said it could total as much as $65 billion all together.

The three lease holders – BP, Exxon and ConocoPhilips – have already hinted, loudly, that an acceptable tax scheme will be an essential element in the feasibility of a project of this scope and their willingness to pull it off.

Parnell’s 2014 budget calls for $50 million for gasline development, with half going to AGIA and half going to the Alaska Gasline Development Corporation.

While Parnell certainly faces a more like-minded legislative leadership in 2013, many of the Republicans who won key Senate seats had pledged in the weeks leading up to the election that they wouldn't be rubber-stamping any plans, that their minds and votes were their own and they'd decide independently what they felt was best for their constituents and the state.

Contact Jill Burke at jill(at)alaskadispatch.com