Alaska News

In Walker's new budget, senior citizens and local jails are among those to feel the pinch

JUNEAU -- After pledging last month to cut more than 6 percent from state agency spending, Gov. Bill Walker on Thursday revealed just how he'd do that, releasing a proposal that trims $240 million in part by cutting 250 of the state's 22,000 full-time employees.

In a speech in late January, Walker gave a preview of his budget proposal, warning legislators and citizens that a drop in state oil revenues would force a discussion about "deep cuts" that would "hurt." But he didn't say exactly who would be affected, instead offering an outline that showed the reductions from each state department.

On Thursday, he released a detailed plan showing for the first time which specific programs and people will suffer the pain as he attempts to close a $3.5 billion deficit.

The cuts, which are subject to approval and adjustment by state lawmakers, are contained in hundreds of pages of budget documents -- and legislative staff and reporters were still reviewing the package late Thursday to discern its impact.

But some of the first specifics to emerge showed how the cuts would affect people across the state, as Walker takes his initial steps toward closing the gap between the current year's $6.1 billion spending plan and the $2.5 billion in expected revenue.

Senior citizens in two income brackets would see a 20 percent drop in the payments they receive under a benefits program run by the state health department, for example, saving about $5 million. Fifteen local jails across the state will lose a total of $9 million from the corrections department.

And 329 out of a total 25,000 state jobs would be eliminated — those numbers include part-time and temporary positions — although many of the jobs are vacant or filled by people expected to retire soon.

The plan's release ends an anxious month in Juneau for lawmakers, their staff and interest groups who typically get the governor's budget proposal in December and have time to review it before the legislative session begins in January.

The delay stemmed from a change in administrations after Walker unseated incumbent Gov. Sean Parnell in November.

"It feels like a slow-motion poker game," said Joelle Hall, the operations director of the Alaska AFL-CIO, an umbrella labor group that includes several state employee unions. "Everyone's just waiting to see what's going to happen."

Walker's release of the plan kicks off a back-and-forth with legislators, who are awaiting an analysis of the documents from their staff members expected early next week. The House and Senate will then tinker with the budgets for each state department in committee hearings — adding money to their favored programs and slicing it from others — before sending a revised budget back to Walker, who can veto spending levels above the proposal he released Thursday.

Republican House leaders said at a news conference Thursday morning that they would consider both cuts and added spending for state programs.

"There's some (that) should be downsized and some that should probably grow," said Rep. Craig Johnson, R-Anchorage. He added that more permitting staff, for example, could help the state extract resources more quickly and generate more revenue.

Each of the state's 14 executive branch departments would get less money next year from the general fund — its primary spending account — under the plan Walker released Thursday. But some were hit harder than others.

The Department of Environmental Conservation, which monitors air and water quality and oversees spill prevention and response, would lose 9 percent of its general fund spending and 22 of its 557 full-time positions.

The Department of Transportation would lose 4 percent and just six of its 3,200 positions, while the fish and game department would actually add a position.

Some of Walker's departments are also accounting for savings from his administration's proposal to expand Medicaid, the public insurance program for low-income people and people with disabilities. The state corrections department, for example, is expecting to recoup $4 million on inmate health care.

Valerie Davidson, the state's health commissioner, declined to identify savings in her department, saying the Walker administration would reveal more details on potential savings from Medicaid expansion on Friday.

One other unanticipated element of Walker's budget was $175 million in new costs from oil tax credits. The state uses the credits to spur oil production, providing an incentive for producers to pump more and for explorers to search for new deposits.

While producers such as ConocoPhillips and ExxonMobil can subtract their credits from production taxes, smaller companies doing exploration can be paid credits they earn from the state treasury.

The total amount has increased from the $525 million anticipated in the Parnell-drafted budget to $700 million in the new Walker budget released Thursday, less than two months later.

Administration officials said the change was due to more data released by the companies about the work they are planning in Alaska, and the value of tax credits the companies expect to claim for that work.

In the next fiscal year, state budget projections show that those tax credits will exceed the amount the state expects to receive in oil production taxes.

That means the state will get a negative return on oil production taxes, but due to oil royalties the state will still receive a net positive from oil revenue.

"I don't think anybody intended for it to be upside down, if you will," Walker said at a news conference. But he added that he had no plans to propose any changes to the credit system during the current legislative session.

On Thursday, however, the focus was on the cuts — and Walker's budget director, Pat Pitney, said each of them would have an impact.

"There's no painless reduction. It means you either do something completely different, or you do less because you have fewer people to do the job," she said at the news conference. "Each of these reductions that have come out, somebody's going to notice. And they're going to be calling and asking, and saying, 'Why me?'"

Kathie Wasserman, the executive director of the Alaska Municipal League, which advocates on behalf of local governments, said her group will discuss the items in Walker's budget and make decisions about which ones to fight and which ones to accept.

The loss of the money for local jails, she said, "will hurt."

But her members knew they would have to "take some hits," Wasserman added. And she said she was happy to see Walker's budget included money he had promised for another program called municipal revenue sharing.

"We've told the governor and we've told the Legislature that we understand the deficit and we're trying to be as helpful in that as we can," she said, adding that the group's next goal is to avoid further reductions from the Legislature.

Walker, at the news conference, characterized his proposal as a significant step toward fixing the state's budget problems.

"This is something we have to take seriously, and we just can't kick this can down the road and assume things are going to get better," he said. "We have to take some steps now and that's exactly what we've done."

But Gunnar Knapp, an economist who leads the University of Alaska Anchorage's Institute for Social and Economic Research, pointed out that in the context of the state's multibillion-dollar deficit, the scope of the cuts was still relatively small.

The state's total operating spending from savings — which includes programs beyond the agency spending targeted for the 6 percent cut by the governor — would drop less than 2 percent under Walker's plan, from $5.5 billion to $5.4 billion.

"It's a significant cut. It's difficult. It's unpleasant," Knapp said in a phone interview. "And yet the damn annoying thing about it is it's really barely a dent in a $3 billion deficit. And that's the challenge."

Revenues from North Slope oil support the vast majority of state spending, and if prices — currently half what they were last summer — rebound soon, then Walker's cuts will be sufficient, Knapp said.

But if they don't, he added, "then this level will not be enough."