Walker Outlines Plans For Budget Cuts

(Skip Gray/KTOO Public Media)
(Skip Gray/KTOO Public Media)

With Alaska facing a multi-billion-dollar budget shortfall, Gov. Bill Walker is proposing 5 percent cuts to agency funding. He described his fiscal plan in his State of the Budget address on Thursday night — a speech that has not been given since 2006. APRN’s Alexandra Gutierrez reports.

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There was no mention of Alaskan Brewery beer or Mat-Su carrots — no applause lines or jokes. Compared to Wednesday’s State of the State speech delivered, Gov. Bill Walker’s State of the Budget address was a sober event.

“Alaska’s state government funding has two drivers: oil price and oil production,” said Walker. “Unfortunately, neither is going in our favor right now.”

For half an hour, Walker described the budget he planned to submit. He has until February 18 to turn in his own budget, and he’s been using former Gov. Sean Parnell’s plan as a placeholder in the meantime.

Walker said cuts would be spread across the board. He intends to shrink agency expenditures that are not dictated by formulas by 5 percent from the draft he was given by Parnell. Walker said that amount would be doubled for his own office. By the end of his term, agency budgets could be reduced by as much as 25 percent.

Walker also said that even the sacred cows of the Alaska budget would not be off limits.

“In my endorsed budget, the K-12 formula funding remains intact, but I’ve eliminated the one-time funding added last year,” said Walker. “This equates to a 2.5 percent funding reduction.”

Walker noted that the school funding formula would be reviewed over the next year, and that education would be forward funded at 90 percent instead of in its entirety.

Community revenue sharing — the money the state provides to municipalities to bolster their own budgets — was described as vulnerable and at risk of being phased out, though Walker plans to keep the program mostly intact this year.

“Municipalities will receive $57 million dollars in revenue sharing. That is $3 million less than last year,” said Walker.

While cuts were the general rule, Walker mentioned a few additions to his budget. He bumped his capital request up to $150 million in state spending to include some projects that are currently under construction, but not yet complete. And he again asked for the Legislature’s support in seeking $450 million in Medicaid funding from the federal government.

“Investing in the health of Alaskans is sound, prudent fiscal policy,” said Walker. “We all want Alaskans to be as productive as possible, but people cannot work, hunt or fish unless they are healthy.”

Walker said that with a leaner budget, the state should be able to deal with a shortfall so long as oil prices bounce back next year. But if they do not, Walker suggested that the state may have to look at finding new forms of revenue next year, which could mean taxes or repeals of credits and subsidies.

“If prices stay low next legislative session, we will need to discuss more traditional revenue options,” said Walker.

At the end of his speech, Walker’s staff distributed a slim budget handout to legislators. With his official operating and capital budgets still outstanding, the packet gave agency spending totals with itemizing how the money was being used.

It showed that the Departments of Labor, Commerce, and Law face the deepest cuts, while the Departments of Natural Resources and Public Safety as well as the university system survive mostly intact.

The budget summary also showed that even after all the reductions Walker described, Alaska was still facing a deficit in excess of $3 billion. And while every agency but one was seeing its funding cut, Walker’s budget was still technically larger than the one than Parnell handed to him because Walker does not plan to use bonds to cover a $257 million appropriation to the state’s pension fund.

After skimming the freshly released budget documents, legislators responded mostly favorably to Walker’s State of the Budget address.

Sen. Anna MacKinnon, an Eagle River Republican who co-chairs the finance committee, said she was encouraged by Walker’s direction.

“I think the governor took a courageous first step in putting things on the table that are going to be hard to talk about,” said MacKinnon.

Senate President Kevin Meyer, of Anchorage, said he was “lockstep” with the governor in trying to address the state’s shortfall, but was disappointed to hear that education cuts were possible.

“We’ll certainly look at that, and talk to our local school districts, and just see what kind of impact that will have to our schools,” said Meyer.

In addressing Walker’s budget speech, House Finance Co-Chair Steve Thompson noted that the state may have to consider taxes as well as cuts to address the deficit.

“We’re going to have to realize that even with this reduction and probably another reduction next year that we’re still going to run out of money here in a very short time,” said Thompson. “I think we need to start the discussion about reducing the budget. We’re doing our side of the job, but that’s not going to complete the job. We’re going to have to look at other revenues.”

Meanwhile, Democrats responded positively toward the speech, but acknowledged the way education and labor spending were treated gives them pause.

“We applaud that he wants to stay focused on the long game,” said Senate Minority Leader Berta Gardner, of Anchorage. “That’s what we have to do, and one of the problems with the legislative process is we get bogged down and we have to plan for tomorrow, and not overreact today.”

While lawmakers do not yet have Walker’s budget before them, the Legislature finance committees are already meeting to do work on the document.