A fiery Gov. Bill Walker on Wednesday decried the Alaska Legislature’s failure to fix a $4 billion gap in state finances and left open the possibility of using his veto powers to reduce state spending beyond a compromise budget approved by lawmakers this week.
“Do we have to go broke before we fix Alaska?” Walker said in a press conference held after the passage of the budget.
Walker indicated he will not veto the entire budget but has not yet decided whether he will exercise his line-item veto power on specific appropriation items within the budget. That might be determined by what new taxes and revenue measures the Legislature approves in the remaining 21 days of a special session called by Walker.
“If things don’t change, if they kick the can down the road, there’s going to be budgetary consequences,” Walker said.
On Tuesday, the Alaska Legislature approved a budget that calls for spending about $4.368 billion on operating expenses and capital construction projects in fiscal year 2017, which starts July 1. Roughly $3.2 billion of that figure would be funded from the state’s Constitutional Budget Reserve savings account.
[Legislators avert shutdown, but deficit remains.]
Those figures are only part of the story, Walker and administration officials said. They don’t include new money the Legislature is spending but has put in a supplement to the current fiscal year budget so it doesn’t show in the FY17 figure.
“The Legislature reported yesterday that they’ve significantly reduced the deficit … but they’ve moved a lot of money into (fiscal year 2016) and into one-time sources that we will have to account for,” said Pat Pitney, director of the state Office of Management and Budget.
According to figures provided by Walker’s office, the Legislature has approved about $642 million in spending outside the 2017 budget. If Walker does not veto that spending, it would mean a $3.8 billion draw from the Constitutional Budget Reserve.
“The CBR balance will be less than $3 (billion) at FY17 year end,” a handout provided by Walker declares.
“We haven’t substantially moved the dial,” Pitney said.
Without new revenue or substantial spending cuts, “the CBR won’t be able to fund the budget” next year, Pitney warned.
Unless oil prices rebound, the state will have to spend from the earnings reserve of the Alaska Permanent Fund to make ends meet. That will jeopardize the annual Permanent Fund Dividend and could lead to steep tax increases.
If Legislators don’t act sooner, they will be forced to act later, Walker said. He continued to urge the passage of his comprehensive fiscal plan, which calls for a sustainable draw from the Permanent Fund earnings reserve.
He had tough words for legislators who say they don’t have enough information or don’t understand that plan.
“If somebody doesn’t understand the plan at this point … I would say they have not paid attention,” he said.
The governor and his staff have held hundreds of meetings across the state and called the Legislature to a pair of unique meetings in Centennial Hall to explain the proposals. Lawmakers have said they want analyses of the impact those proposals will make on the Alaska economy, but revenue commissioner Randall Hoffbeck said his office has provided what modeling it can.
Walker said he would welcome any alternative proposal from the Legislature. “There’s nothing we won’t do at this point,” he said.
He added that unfortunately, “their plan was to take shots at pieces of our plan.”
“I’m the governor of Alaska. I will engage every day to get this through,” he said, but his greatest worry is that nothing will be done and “I’ll be here next year, having the same discussion. Fix the problem. Fix it now.”
• Contact reporter James Brooks at james.k.brooks@juneauempre.com.
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