House budget proposal criticized as 'shell game'

JUNEAU — Republican and Democratic members of the Alaska House Finance Committee expressed shock and amazement Tuesday when they learned that the administration of Gov. Bill Walker had newly accounted $288 million in savings.

The revelation of the money in a savings account thought to be drained — a combination of investment earnings and unspent cash left over from previous years' budgets — added to some members' growing frustration that the committee's Republican leaders are using accounting tricks to conceal the state's true spending levels.

The disclosure of the $288 million came during a Tuesday afternoon hearing as committee members discussed a $30 million pilot program for treatment of substance abuse — one that they ultimately approved.

But at the request of Big Lake Republican Rep. Mark Neuman, the committee co-chair, and four other members, they put the money in the current year's budget — not the budget for next year that's lawmakers' primary focus in Juneau, as they try to close a $3.8 billion deficit.

That move prompted objections from several colleagues, including Rep. Lance Pruitt, R-Anchorage, who said that old claims that lawmakers cut the current year's budget by $800 million would have to be adjusted, reducing the cut by $30 million. He and other GOP colleagues, as well as Walker's administration, are essentially accusing Neuman of shifting spending to this year's budget so that next year's budget looks smaller.

"It almost seems like we're trying to play a little bit of a shell game, trying to hide our expenses this year by going back and adding it to last year," Pruitt said during Tuesday's hearing.

The Walker administration's criticism was similar, with budget director Pat Pitney writing in a letter last week that the House's $4.1 billion budget proposal shifts money between different accounts to make the spending level "artificially lower" by $300 million.


"It does not address the budget in a sustainable fashion," Pitney wrote. "It pushes the funding problem into the future."

The underlying issue is buried inside the House Finance Committee's 79-page budget proposal. While the legislation primarily addresses spending in the next fiscal year — from July 1 to the end of June 2017 — it also includes sections that impact spending in the current fiscal year, which runs through the end of June 2016.

The extra money added to the current year is known as the "supplemental budget" and it's standard legislative procedure, since revisions are almost always needed to the state's multibillion-dollar spending plan.

The purpose of the supplemental budget is to account for unanticipated expenses or income, like legal settlements, wildfires and extra plowing in heavy snow years.

But in the House Finance Committee's budget proposal released last week, Neuman is proposing supplemental spending of more than $500 million to shift money from the state's all-purpose account, the general fund, into other state savings accounts.

Under the proposal, which was also put forward by the Senate, some of the money would then be drawn out of those accounts in the coming year's budget.

About $80 million put into the state's higher education investment fund in the current year's budget would be withdrawn from the fund in next year's budget to pay for the state's teachers pension system. And after putting $435 million into the public education fund in the current year's budget, the House proposal would spend $145 million less on education in next year's budget — anticipating that it could spread the extra $435 million over three years.

The moves have the effect of boosting spending in the current year's budget, but then making next year's appear to be at least $200 million lower because money spent from the higher education and public education funds doesn't show up in the most frequently cited totals of state spending, which typically refer to the general fund.

It also would force lawmakers to find an extra $145 million to pay for schools when the $435 million in the public education fund runs out.

The changes weren't proposed as part of the Legislature's public budget process, in which committees typically scrutinize and adjust spending by individual state agencies. And one of Neuman's Republican colleagues on the House Finance Committee, Tammie Wilson of North Pole, said she only learned of the accounting shifts when the full budget proposal was released last week — and they made her unhappy.

"It's not being honest whether or not we are actually resizing government, or it just appears that it's getting smaller," she said in an interview. "I want to make sure that at the end of the day, my constituents understand where we started and where we ended."

In an interview in his office Tuesday, Neuman said there was nothing secret or opaque about the House proposal or the use of the supplemental budget. But he acknowledged the plan was his, and didn't emerge from collaboration with his colleagues.

"We just used some of last year's funds that were left over," Neuman said. "Why would you put the money back, and go right back and take it out?"

One reason the House can propose the extra spending in the current year's budget is because of the extra $288 million that was referenced in Tuesday's committee hearing.

Lawmakers thought they could only spend up to $500 million in the supplemental budget, based on legislation that they approved during a special session last fall. But one of Neuman's aides, Pete Ecklund, announced during Tuesday's hearing that number was $288 million higher based on the savings accounted for by the Walker administration.

The money is sitting in the Statutory Budget Reserve, according to Pitney, Walker's budget director.

It's a combination of investment earnings and money from the 2014 and 2015 budgets that wasn't spent, and it didn't come as a surprise to the Walker administration that it was there, Pitney told reporters Tuesday.


"It's not special. It's not found," she said. "It's accounted for."

Pitney said the money in the account was disclosed when Walker proposed his amended budget last month. But several lawmakers on the House Finance Committee expressed amazement when they learned about it Tuesday.

"We're cutting people left and right. I'm taking huge hits on what we're doing for the vulnerable, and we just found $288 million in the couch cushions," said Rep. Lynn Gattis, R-Wasilla. "How do the people back home even trust us anymore? $288 million is not like a $20 bill that slipped out of our pocket."

Neuman said in a text message late Tuesday that the money in the reserve account had previously been announced when the House Finance Committee's budget proposal was first released.

Pitney said the Walker administration wants lawmakers to treat the $288 million the same as money in the state general fund.

"We'd like to have a very sustainable, clean, transparent approach," she said. But, she added, referring to the Legislature: "They're the appropriators."

Nathaniel Herz

Anchorage-based independent journalist Nathaniel Herz has been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at natherz.substack.com