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Senate leader proposes cutting municipal revenue sharing, other programs

  • Author: Alex DeMarban
  • Updated: September 28, 2016
  • Published January 15, 2015

Leaders of the Alaska House and Senate said Thursday that cutting spending will be their top priority in what they expect will be a tumultuous session in Juneau, with municipal revenue sharing and the popular home energy rebate program among the items potentially on the chopping block.

"Everything is on the table," said Sen. Kevin Meyer, R-Anchorage, incoming Senate president.

Everything that is, except finding new ways to raise revenue in a state that gets most of its general funds from the oil industry.

"Frankly I really don't even want to discuss additional revenue sources other than maybe marijuana because we have to," said Meyer, adding that the fishing, mining and oil and gas industries are already overtaxed.

"I want us to keep focused on the spending side, because once you start looking at additional revenue, you go, 'Well, maybe we don't need to cut that,'" he said, speaking to a large breakfast crowd at the Resource Development Council meeting at the Dena'ina Center in Anchorage.

As for new revenue that might come from regulating the commercialization of marijuana, an opportunity recently approved by voters, that won't do much to close the state's massive budget gap caused primarily caused by cratering oil prices.

"Some people say it's our new revenue source," Meyer said. "Boy, I just don't think you can smoke enough pot to offset a $3.5 billion deficit."

Meyer said it's important to cut the budget carefully, or the Legislature will risk damaging the economy it has worked so hard to strengthen.

"We want to take a phased approach to dealing with this gap," he said.

He said there are good things underway in Alaska, including high employment in the Cook Inlet and North Slope oil and gas fields and gas line projects that are advancing.

And he said more than $4 billion in capital funds appropriated by the Legislature in past years, much of that in transportation, has yet to hit the streets. That will cushion the blow if oil prices remain low for a long period, as many analysts now expect.

Meyer said it's important to look at cutting programs that were instituted starting about 2007, after the state rode out the last downturn in oil prices. The increase above $100 a barrel fueled years of budget surpluses and provided billions in savings the state is living on. Oil prices now have crashed below $50 a barrel.

"If we got by with not having (the programs) back then, why do we still need them today?" he asked.

Some programs that could be cut, he said, are municipal revenue sharing, launched to help municipalities when oil prices drove up local-government costs but brought the state additional income; a renewable energy fund created to find alternatives for rural residents strapped with high heating fuel costs; and the home energy rebate program that provided cash incentives for Alaskans who weatherized and upgraded homes.

Eliminating those programs could save more than $100 million. More than $50 million went to municipal revenue sharing this year. About $50 million a year has been going to the renewable energy fund. The lower oil and fuel prices might help offset the pain for Alaskans and municipalities, he said.

House Speaker Mike Chenault, R-Nikiski, agreed that a careful approach is necessary. The capital budget, which has already been sharply reduced in recent years, will be relatively easy to cut.

But not the operating budget.

"I don't see it by across-the-board cuts," he told the crowd. "The way I see it is it will have to be complete programs."

Chenault said he had no programs in mind yet but that discussions on possibilities are already underway.

He said the Legislature was waiting for Gov. Bill Walker, who has submitted former Gov. Sean Parnell's operating budget as a starting point, to provide his modifications.

Expanding Medicaid, a prominent promise Walker made during his campaign, isn't off the table but it doesn't have a promising future, Chenault said.

"What we can't do is continue to look at new programs, and expansion of Medicaid is a new program," Chenault said. While Medicaid will currently be paid for by the federal government, it will cost the state $10 million to $12 million to institute the program and set up departments, he said.

Education will be another top priority for the Senate majority, Meyer said. He wasn't expecting new spending on education in part because the Legislature funded public school support for the next three years.

"We will continue to look at online teaching and education out in rural Alaska, and look for ways to further educate our kids that aren't going to cost the state a whole lot of money," Meyer said.

Meyer said the governor has raised the issue of revisiting tax credits that go to the oil industry. But Meyer said he believes a review will show they're largely going to the small independent producers the state wants to help to encourage exploration and production.

Chenault also said marijuana will be looked at.

"While the administration will be writing regulations, there are legislators that have concerns with things like edibles and other (issues) and how those should be put together," he said.

Attacking the federal government's approach to resource conservation and protection would also be another priority, both lawmakers said. Chenault said federal land ownership has kept Alaska from becoming self-sufficient and forced the federal government to subsidize the state.

"What's happened is the federal government has forced that to happen because we are not allowed to develop the resources in our state how we believe we should," he said.

Rep. Berta Gardner, D-Anchorage, who sat in the audience, said it will be a "rough and tumble" year.

She said she was open to making cuts and getting spending in order before creating a long-term fiscal plan. Municipal revenue sharing is critical, she said, but it will likely go away this year. She said she'd support that in exchange for other things, such as possibly Medicaid expansion.

"Everything has to be on the table," she said. "It really is a crisis. We have to bring that home," she said.

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