Governor Parnell Signs FY 12 Capital & Operating Budgets with Vetoes

Governor Parnell released the final operating and capital budgets and held a press conference to discuss his vetoes on Wednesday, June 29. Budget documents are on the Office of Management & Budget website:  

Governor Parnell made $400 million in vetoes to the capital budget and said declining oil production and unfunded pension liability make fiscal discipline important. He is working on increasing oil production, and said that until someone else has a better plan, he will continue to pursue his plan to increase production. Tax incentives for Cook Inlet are working, and that’s what he wants to do for the North Slope.

Governor Parnell said the capital budget focuses on energy, infrastructure, and job creation. There are lots of good projects, and vetoes made on projects this year may be funded next year. He also looked at regional balance, and said he did not retaliate against legislators in his vetoes. He did not want to spend more this year than was spent last year. Just under $300 million remains in the capital budget for education projects. The top 14 projects on DEED’s major maintenance list made the cut (just under $20 million in funding). Funding for school construction grants was cut from a total of $76.5 million to just under $62 million. Construction funds for the Kivalina School were cut, but that project was contingent upon the community moving to a safer location. There is over $1 billion for energy projects.

Governor Parnell said there is 2.9 percent growth in the operating budget, which is primarily the result of statutorily mandated programs. The operating budget fully funds legal obligations of the state, including school formula funding, Medicaid costs, and unfunded pension liability. The annual payment on the unfunded pension liability escalates yearly, and is an issue the ARM Board will have to address. He said the majority of the vetoes he made in the operating budget related to decreasing debt service. The state is legally mandated to pay for most of the items in the operating budget, so it was harder to make cuts.

In terms of savings, the state will have over $15 billion in various savings accounts with the signing of these budgets, including $400 million in the Alaska Performance Scholarship fund, $400 million in the PCE fund, and $1 billion in forward funding for education.

For full details on education funding, see the Wednesday, June 29 and Thursday, June 30 issues of the Alaska Education Update.