The Capitol Report 5/16/16: Capital and Operating Budgets

May 16, 2016

The Capitol Report – May 16, 2016
By Chris Christensen, Associate Vice President for State Relations

May 16 is the 119th day of the legislative session. We are well past the 90-day session limit imposed by the voters in 2006, and approaching the 121-day limit mandated by the Alaska Constitution. The legislature can continue the regular session past Wednesday only if two-thirds of the House and two-thirds of the Senate vote for an extension, and any extension cannot exceed ten days. If the legislature is unable to finish its work by the end of the regular session, it can call itself into special session or be called into special session by the governor. Special sessions are up to 30 days in length and are limited to specific topics, but there is no limit on the number of special sessions that can be called.

The legislature is still working to enact operating and capital budgets. It is also still debating elements of Governor Walker’s proposal to reduce the size of the budget deficit. That proposal would impose new taxes, increase certain existing taxes, reduce oil tax credits, reduce the size of the Permanent Fund Dividend, and change the way that state revenues are accounted for.

We are seeing indications that the legislature may try to enact operating and capital budgets in the next 10 days, but nothing is certain.

Capital Budget
The Senate finally passed a capital budget several days ago. As reported last month, the governor’s capital budget proposal for FY17 was very small and contained only $188 million in general funds for capital projects. Ten million dollars of that total was for the university to spend on deferred maintenance. The Senate’s capital budget significantly reduces the governor’s proposal. The Senate wants to spend only $155 million in general funds, and it removed the university’s deferred maintenance funding. We had hoped that the Senate would leave the deferred maintenance funding intact and add some funding to continue work on the UAF engineering building, but that didn’t happen.

The House could add back the $10 million requested by the governor for deferred maintenance, and while it is unlikely at this point, it could add some money for UAF engineering. If you are interested in providing the House Finance Committee with testimony or written comments on the capital budget, here is the information posted by the committee:

You can send written testimony to the House Finance Committee at this address: house.financelegislation@akleg.gov. If you prefer to contact members of the committee individually, you can find email addresses and phone numbers at the following links:

Representative Steve Thompson, Co-Chair, (R) Fairbanks
http://akleg.gov/legislator.php?id=thp

Representative Mark Neuman, Co-Chair, (R) Big Lake
http://akleg.gov/legislator.php?id=neu

Representative Dan Saddler, Vice-Chair, (R) Eagle River
http://akleg.gov/legislator.php?id=sad

Representative Bryce Edgmon, (D) Dillingham
http://akleg.gov/legislator.php?id=edg

Representative Lynn Gattis, (R) Wasilla
http://akleg.gov/legislator.php?id=gat

Representative Cathy Munoz, (R) Juneau
http://akleg.gov/legislator.php?id=mun

Representative Lance Pruitt, (R) Anchorage
http://new.akleg.gov/legislator.php?id=PRU

Representative Tammie Wilson, (R) North Pole
http://akleg.gov/legislator.php?id=wlt

Representative Les Gara, (D) Anchorage (minority member)
http://akleg.gov/legislator.php?id=gar

Representative David Guttenberg, (D) Fairbanks (minority member)
http://akleg.gov/legislator.php?id=gtt

Representative Scott Kawasaki, (D) Fairbanks (minority member)
http://akleg.gov/legislator.php?id=kaw

Operating Budget
The conference committee for the operating budget is still working to reconcile the House version and the Senate version of the operating budget. It has six members: House Finance Committee Co-chairs Mark Neuman and Steve Thompson; House Finance minority member Les Gara; Senate Finance Committee Co-chairs Pete Kelly and Anna MacKinnon; and Senate Finance majority member Lyman Hoffman.

As you will recall, the House proposed a $50 million dollar cut from the current year’s budget, while the Senate proposed a $25 million cut. Unfortunately, last month the conferees voted 5-1 to tentatively adopt the larger House cut.

One of the things that will affect the final budget is the need to access savings to fund the deficit. The $4.1 billion deficit in FY16 exists because state spending exceeds revenues by that amount. In order to cover next year’s projected deficit, the legislature needs to take money out of a savings account. There are two accounts available: the Constitutional Budget Reserve (CBR), and the Permanent Fund Earnings Reserve (PFER).

To access the CBR, the House and Senate each need a three-quarters vote. The Senate majority is large enough to provide a three-quarters vote in that chamber. However, the House majority is less than three-quarters of that body; in order to get enough votes, the House majority needs votes from the House minority. This means that the House minority gets a say in the final budget. The same situation existed last year, and in exchange for the minority providing the needed votes, the majority agreed to add more money to the operating budget, including more money for the university. House minority legislators have said that they would make the university budget one of their priorities in negotiations with the majority.

There is another way to fund the deficit that doesn’t require a three-quarters vote. The legislature can withdraw money from the PFER with a simple majority vote, and if it does that, it doesn’t need to add money back to the UA budget to obtain the votes of minority members. Many legislators see political peril in accessing the PFER because that is the account used to pay Permanent Fund Dividends, and they would prefer to take money from the CBR. It is not clear at this time if negotiations to access the CBR will be successful, or if the PFER will be used. We should find out in the next week.

Thank you for all your work to promote and support the University of Alaska!


The Capitol Report, written by Chris Christensen, UA Associate Vice President for State Relations, is designed to keep the University of Alaska community informed about the current legislative session, particularly its impact on the university budget. Subscribe to the SupportUA mailing list to receive upcoming reports and view the archive at alaska.edu/state/report. Each new issue of The Capitol Report will also run in the following day’s Seawolf Daily.

For more information, contact Associate Vice President Chris Christensen at cschristenseniii@alaska.edu or visit alaska.edu/state.

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