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Speech: 2013 Alaska State Budget Roll-Out

Dena'ina Center

Governor Sean Parnell
December 15, 2011

Thank you. Good afternoon. It’s an honor to be back at Chamber.

Alaska’s Constitution grants the Alaska Legislature the power of appropriation—the power to spend.

And it also provides a strong role for the governor-- authority to propose a budget to the legislature every year by December 15. And line item veto authority at the end of the legislative process.

Today, I propose a balanced budget that is more than eight hundred million dollars lower in total spending than the current year, and six hundred million dollars lower in unrestricted general fund spending.

We deleted 284 vacant full-time and part-time positions and asked agencies to reallocate the funding to show where it is needed—to “true up” or more honestly reflect where the spending is being utilized.

With that lower starting point on dollars and positions, we can have a public conversation with the legislature about needs versus wants, about efficiencies and about more effective use of the public’s dollars.

In its restraint, this budget proposal will send a strong message that our spending must not spike up just because the state has surplus funds. And, indeed, I don’t expect the legislature to spend in the next year beyond what it did, with my signature, this year.

Our administration’s fiscal responsibility is evidenced by record vetoes I exercised across the last two years, totaling 700 million dollars. It’s evidenced by the budget discipline our commissioners and leadership exacted to get the budget proposal before you today. And along the way we’ve demonstrated genuine results for Alaskans.

Results like…fewer Alaskans having to wait in line at the DMV office because you can complete a license renewal on-line and through the mail.

Results like…quicker response time from our Department of Commerce to those Alaskans who want to form small to mid-sized businesses and corporations!

And, results like, Alaska Performance Scholarships funding a portion of college or job training programs for high school graduates in 2011 who earned these scholarships.

In our proposed budget released today, we continue to focus on fiscal responsibility and results.

On the revenue side: Unlike most states, we enjoy a pretty good picture. We have savings in the bank and healthy surpluses. Alaska has nearly $13 billion in savings, not counting the Permanent Fund.

And, with this budget we project we will still have surplus revenue of $3.7 billion.

If we maintain our spending discipline, we can put billions in savings this year to draw from in more lean years, and use some to leverage long term investments.

On the spending side: Alaska’s constitution guides our priorities: Resource Development; Education; Public Safety; and Transportation/Infrastructure.

Resource development is crucial to our state’s economy.

So, this budget proposes to increase access to Alaska’s resources.

Our Roads to Resources Initiative will be funded at $28.5 million to access oil & gas rich lands around Umiat -- in the Foothills West; to open access to the Ambler Mining District; to open up mining lands in a route to Tanana; and to fund work on the Klondike Industrial Use Highway outside of Skagway, to name a few.

This budget is also aimed at streamlining the state’s permitting processes. With $3.3 million in new dollars, we intend to provide more timely decision making for mining, timber, public access, land sales and transfers, and other resource development applications.

We’ll obtain more critical data about Alaska’s Rare Earth Elements and Strategic Minerals beneath Alaska lands with an appropriation of $2.7 million. And, we’ll initiate a geologic assessment of shale oil on the North Slope and other areas of Alaska.

On the gas line, I led this fall by saying the parties and projects need to align and consolidate around a pipeline in Alaska to tidewater. This budget funds $60 million for AGIA reimbursement as they realign around an Alaska line and $21 million for AGDC’s work.

One thing often overlooked in growing an economy is the value of a good map. USGS topographic maps of Alaska are more than 50 years old, inaccurate, and do not meet national mapping standards.

Accurate elevation data is vital to responsible resource and economic development, aviation safety, navigational devices, modern-day emergency response, and routing for roads and pipelines.

To address this, we propose to fund a Statewide Digital Mapping Initiative.

Funding Roads to Resources; more timely permits; a rare earths assessment; and statewide digital mapping — it’s all about jobs and creating new opportunities for independent, hard-working Alaskans to move forward.

Turning to Education

As I touched on earlier, more than 2,000 Alaska students qualified for Alaska Performance Scholarships this fall. We pioneered these scholarships, because to be competitive in this world, our young people must take more rigorous high school coursework. And to get them to take more rigorous coursework, we employed that age-old concept of more work equals reward. Alaska’s high school students can earn scholarships to an in-state, post-secondary education through their own efforts.

In this budget, I’ve proposed ongoing performance scholarship funding for the class of 2011, as well as scholarship funding for our high school graduates in the class of 2012.

The budget also forward funds and fully funds the K-12 public education funding formula and pupil transportation program.

Along with creating economic opportunity through resource development and a better education, our budget prioritizes public safety.

Public Safety

We’ll add 16 law enforcement officers across this state, most of whom will live in villages that have no law enforcement presence. Our budget proposal also adds funding for domestic violence shelters and housing for victims, and it provides screening and services for children traumatized by sexual abuse.

We’re not going to rest so long as the epidemic of domestic violence and sexual assault steals the hopes and dreams of Alaskans.

Every able Alaska family also needs to be ready for natural disasters with seven days of safe drinking water and food supplies. If we have a major earthquake here, for example, or if one occurred in the Seattle area, Alaska’s supply chain could easily take seven days to re-establish. In the meantime, grocery store shelves would be empty and we’d be on our own.

Also, in a large-scale disaster, families could be without their homes or access to their stored provisions. For that reason, the budget proposal includes a request for $4.9 million for emergency food supplies.

This past legislative session, began to systematically build our capacity. We asked for and obtained funding from the legislature for emergency power generators and water purifiers. This next step provides for emergency food supplies.

Lastly, in the realm of public safety, Alaska State Troopers are called to remote areas under adverse weather conditions for law enforcement, search and rescue, and other emergencies. In these situations, the troopers need a helicopter equipped for these missions and our budget proposal advances a funding request for this vital equipment.

Before moving more directly into transportation and infrastructure—or a broader overview of the capital budget, let’s go to The Numbers.

So, what does the FY2013 budget total?

The operating and capital budgets add up to 12.1 billion in total funds and 6.4 billion in state general funds. Excluding Permanent Fund Dividend payments, the general fund budget is at $612 million less than the current year. Overall, this represents a decrease of 8.7 percent in state general fund spending.

But let’s not kid ourselves. The state operating budget is increasing. And it’s going up in a few key areas the public deserves to know about.

The proposed state general fund operating budget increases 4.5%.

Operating Budget Highlights

Some of the more significant increases include the following:

- Unfunded Pension Liability—Increasing by $131 million, for a total of $610.5 million.

Medicaid Formula Costs—Increasing by $131 million total, 45 million of General Fund. Most of the increase is driven by federal mandates.

- Employee labor contracts increasing by $66 million total, 34 million of General Fund.

- Goose Creek Correctional Center opens—increasing operating costs by $29 million.

Capital Highlights

The proposed capital budget totals $1.8 billion, including $882 million in state general funds.

We’ve already talked about some key funding for access to resources. But here’s the larger transportation, infrastructure, and energy picture we’re aiming at to unleash economic opportunities for Alaskans.

Matching/Leverage Funds

We propose funding 136 million in state funds to leverage over 798 million more in federal and other funds.

We propose to fund over one billion dollars for infrastructure projects, including roads and airports, the marine highway, municipal water and sewer projects, harbors, and deferred maintenance.

On the Energy Side – We also have energy-related projects proposed as follows:

• Renewable energy grants - $25 million

• Weatherization - $30 million

• Home energy rebates - $20 million

• Bulk fuel & rural power systems - $15 million

• Full funding for power cost equalization - $38 million

We’re proposing to fund the list of school major maintenance projects – 14 projects - $24 million

And school construction for two schools – $61 million - Emmonak amd Koliganek

Statewide Ports

Too often, the economic development potential of ports and harbors is overlooked. / In many of our smaller communities, ports are the fishermen’s Roads to Resources.

I will ask the legislature to join me in putting to the voters a statewide general obligation bond ports package for approval in November 2012.

The reason for a bond package rather than using state cash is this: We earn more on our state savings accounts than the cost of financing infrastructure such as this.

Additionally, thanks to leadership in the Alaska House of Representatives, we paid off some debt this year, giving us room to take on these general obligation bonds.

Accordingly, I propose a $350 million general obligation bond package for the following port projects throughout the state:

- Port of Anchorage $200 million

- Matanuska-Susitna Borough - Port MacKenzie Rail Extension $110 million

- City of Seward – Community Development Quota Home Port $10 million

- Bristol Bay Borough Port Improvements -- $10 million

- City of Emmonak Port Improvements -- $10 million

- Ketchikan Gateway Borough – Ward Cove Port Improvements $10 million

These projects will provide access and infrastructure needed to support economic development across Alaska.

Our proposed budget for FY 2013 will spend considerably less than what the fall forecast is projecting for available revenue.

As I indicated, these budget proposals leave the state with $3.7 billion in surplus revenue.

We exercise restraint amidst this surplus because of the uncertain future we face: Oil production is declining and oil prices can be volatile; the European debt crisis threatens to become a global contagion affecting the U.S. economy.

Alaska, on the other hand, will lead in fiscal responsibility—we will exercise spending restraint, we’ll budget for results, be accountable for our actions, and save for the future.

Many people work diligently beginning in July of every year to make it possible for us to submit a budget proposal in December. For me, that effort has been led by Karen Rehfeld, our OMB director, with the help of our commissioners and their staffs, and the hard work of our governor’s office staff.

Now, it’s the Legislature’s turn with lots of public input. I look forward to working with the Legislature and hearing from the public on these proposals.

Draft budget bills and more detailed information on the budget are available on the Office of Management & Budget website at omb.alaska.gov/

Thank you – and we have time for questions.

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