Gov. Bill Walker called legislators into a special session to try to balance the Alaska checkbook. They approved a plan to spend $5 billion while identifying around $2 billion to pay for it, an imbalance that would leave the state unable to cover its bills by the fall.
Attempting to end a legislative stalemate, Walker introduced a revised $5 billion budget that calls for spending about $55 million more in unrestricted general funds than the budget approved Monday by the Legislature. It would be paid for with about $2 billion the state expects to collect in oil royalties, taxes and other funds, along with a $3 billion withdrawal from the $10 billion Constitutional Budget Reserve.
That requires a three-quarters vote in Juneau, a near-consensus in state government. A 51 percent majority of legislators could vote to withdraw billions from the Permanent Fund Earnings Reserve, but lawmakers believe that would trigger a public backlash and they aren't ready to take that route.
If approved, the new Walker budget would mean a reduction of about $1 million a day from current state operations, an 8 percent reduction from the operating budget of the previous year.
The goal is to find a way to get lawmakers to compromise and reach the three-quarters majority needed to run state government in the next fiscal year, Budget Director Pat Pitney told the House Finance Committee on Thursday. "The administration is very flexible to whatever the differences are that can get us to a funded budget," she said.
So far, lawmakers have been unable to resolve internal disputes about how to handle Medicaid, education funding, state employee contracts and other items. They couldn't muster the three-quarters majority needed to withdraw $3 billion from the CBR, so they sent the budget to Walker without funds to pay for three-fifths of it, an approach that the governor says is unacceptable.
The splits within the Legislature and between it and the governor are more about Medicaid expansion than anything else, an issue that Walker has made a priority since his 2014 campaign. Legislative leaders have balked at expanding Medicaid, calling for additional study, but Democrats in the House and Senate have sided with Walker.
The Republican-led majority organizations in the House and Senate decided Thursday to give themselves some time off from the budget battle and go home for a couple of weeks, leaving the finance committees to go over the budget details while most legislators are on recess.
The Walker budget and the version approved by the Legislature would both be balanced only by a draw of about $3 billion from reserves for the fiscal year that starts July 1. Under either plan, the main state cash reserve -- not counting the $54 billion Alaska Permanent Fund -- would be exhausted in three years or so, depending upon oil prices and whether new taxes are approved. The legislative budget would keep the Constitutional Budget Reserve in existence for about a week longer than the Walker plan, the administration predicts.
Here is a review of the key changes in the Walker budget from the unfunded plan approved by the Legislature.
MEDICAID: The biggest dollar difference is in the program that provides health care to poor people. The administration wants to accept the federal expansion of Medicaid services, which would bring about $146 million in federal funds to the state in the next fiscal year.
The Republicans have balked at accepting the money because they say they don't know how much it might cost the state in the future. The Democrats have said the state should accept the dollars, as it would benefit Alaskans who need health care.
UNION CONTRACTS: Aside from Medicaid, the biggest change in the budget is that the governor wants to include the funds to honor contracts negotiated with all state unions by the Parnell administration. Cost-of-living increases in those contracts would cost about $24 million in different types of general funds and $11 million in federal funds.
The budget does not provide funds for across-the board cost-of-living increases for nonunion employees. The Legislature sent a separate bill to the governor, House Bill 176, that would cancel a 2.5 percent raise for nonunion workers July 1.
Pitney and Administration Commissioner Sheldon Fisher said the governor wants to seek concessions from the unions and negotiate aggressively, but does not agree with breaking terms of existing contracts. Fisher said the state is already in negotiations with or will be in negotiations with unions representing more than 12,000 state employees, more than half of the workforce, over the next year.
"Going into those negotiations, we felt it was important to honor our contracts and the commitments that we've made," said Fisher.
"Employees generally understand the challenge we're in," said Fisher, adding that both union and nonunion workers recognize the situation. He said the state intends to treat both groups equitably.
EDUCATION: The governor proposed reversing a $16.5 million reduction in the base student allocation. He is proposing that a $39 million portion of education funding be paid for with general fund money, not with funds removed from gas pipeline planning, as approved by the Legislature. Legislative critics of Walker portrayed the $39 million as a spending increase, not a change in funding sources.
MARINE HIGHWAY: The governor is proposing an addition of $7 million to maintain the ferry schedule published last fall, for which reservations have already been accepted.
UNIVERSITY: The governor is asking to put back $7 million of the $29.8 million reduction included in the budget approved by the Legislature. The change would mean that the university system would see a 5 percent funding reduction, instead of an 8 percent cut.
NORTH SLOPE GAS: The administration is proposing adding $4.9 million back to help deal with the efforts to commercialize North Slope gas reserves, a key element in the pipeline plan approved in 2014. This would restore the total to the $13 million originally sought by the governor. "A gas pipeline and commercializing our gas resources is one of our biggest revenue opportunities," said Pitney. "This is a high priority of the governor's."
PUBLIC SAFETY: The governor is proposing putting $1.5 million back into the Council on Domestic Violence and Sexual Assault and $500,000 for helicopter service by Alaska State Troopers in the Fairbanks area.