Politics

On his way out, Gov. Bill Walker unveils balanced-budget plan

Gov. Bill Walker unveiled the first “balanced budget” draft of his four-year term Monday, but it will be up to Gov.-elect Mike Dunleavy to decide whether to implement it.

Walker didn’t release exact numbers, but according to figures presented to the Anchorage Chamber of Commerce and in a spreadsheet released to the ADN, his budget appears to increase state spending by about $330 million for the fiscal year that begins July 1.

That money would partially come from oil: The state is forecasting oil prices to average $76 per barrel during the current fiscal year, which ends June 30, and $75 per barrel next fiscal year.

“Through over a billion dollars in cuts and the restructuring of the Permanent Fund and a little bit of relief on oil price, this year’s budget is a balanced budget, and that’s what we’ll be handing off in a week,” Pat Pitney, Walker’s director of the Office of Management and Budget, told Chamber members.

It’s unclear how much, or if any, of the plan will be taken up by Dunleavy, who takes office Dec. 3. Under state law, the sitting governor is responsible for sending a budget proposal to the Legislature by Dec. 15.

“Typically, they don’t stay the same, and that’s certainly appropriate,” Walker said.

Walker isn’t the first governor to publicly unveil a budget before leaving office. Frank Murkowski did it in 2006. Incoming Gov. Sarah Palin promised to cut that proposal by $150 million, only to eventually sign an operating budget that increased spending and was the second-largest in state history at that point.

Walker himself received a transition budget from departing Gov. Sean Parnell, who is now an adviser to Dunleavy.

The governor’s budget proposal is always raw material for the legislative meat grinder. State lawmakers have their say on the budget and can take it in radically different directions from what was proposed by the governor. Walker’s announcement, given that Dunleavy will have his own opinions, amounts to a first draft of a first draft.

And that’s before the real world enters the picture.

When lawmakers ended their legislative session this year, they approved a budget of $11.2 billion. At the time, the Alaska Department of Revenue estimated that North Slope oil prices would average $63 per barrel and that production would average 526,600 barrels per day between July 1, 2018 and June 30, 2019.

At those prices and production levels, the state was expected to have a deficit of about $693 million.

So far, production has been only slightly below that estimate. Prices have been much higher, even with the recent dip. Through the end of last week, they’ve averaged $75.46 per barrel, more than enough to erase the deficit.

“We will now expect a surplus,” said Sheldon Fisher, Alaska’s commissioner of Revenue, to the Chamber crowd.

Walker is proposing to spend $230 million of that surplus on deferred maintenance projects across the state. He called it an effort to generate construction jobs and said that when combined with matching funds, it could generate as much as a billion dollars in economic activity.

Other spending increases would go toward public education and public safety.

In addition to oil, Walker and his advisers talked about the importance of Senate Bill 26, the Permanent Fund plan approved by the Legislature. That plan, signed into law earlier this year, calls for a regular transfer of money from the Permanent Fund’s investment earnings to the state’s accounts. That transfer can be divided between state services and a dividend however lawmakers wish.

This year’s transfer was $2.7 billion. Next year’s will be $2.9 billion, thanks to the rising value of the fund.

Walker is proposing an $1,800 Permanent Fund dividend, which would cost $1.17 billion. Dunleavy proposed a larger amount while campaigning for governor.

“That will be a decision that the Legislature will have to make and the administration will have to make going forward,” Fisher said.

James Brooks

James Brooks was a Juneau-based reporter for the ADN from 2018 to May 2022.

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