Update on Governor’s vetoes & 5th special session

Dear Neighbors,

We all know Alaska is in a bind.  Oil prices are currently stabilized, but at a relatively low level, which means that our state income from oil is now in the neighborhood of $705 million unrestricted general funds (UGF).  Add in $500 million from non-petroleum revenue and we have about $1.2 billion UGF.  While that sounds like a lot of money, we are looking at a General Fund budget of around $4.5 billion.  This means that we have a hole of more than a $3 billion in our state budget.

During this year’s budget process, the legislature made approximately $400 million in cuts.  These cuts will affect every Alaskan, impacting local services like the Alaska Marine Highway, child protection services, and support for Alaska’s seniors and elders.  For every $100 million in reductions, the Institute of Social and Economic Research (ISER) estimates that the state can expect to see a loss of over 900 state jobs and 700 private sector jobs. 

Thanks to Shepherd of the Valley Lutheran Church for including me in their kids cooking lunch.
We prepared eggs, noodles, rice, locally-grown veggies, and rice crispy treats – delicious and tons of fun!

On June 29, the Governor announced his line-item vetoes of the budget passed by the legislature.  In total, the Governor vetoed $1.29 billion in spending, including the following reductions:

• Cutting $666.4 million from the permanent fund dividend appropriation, guaranteeing a PFD check of $1,000 per person
• Cut $400 million from the appropriation for oil tax credits, leaving $30 million, the statutory minimum requirement
• Reduced department spending by $38 million
  • 12 executive branch departments’ budgets have been cut 20 percent or more in the last two years
• Reduced the University’s budget by an additional $10 million
• Reduced education funding by an additional $58.3 million
  • Cut $6.4 million from the Base Student Allocation (BSA)
  • Reduced school debt reimbursement and rural school construction 25 percent, $30.5 million and $10.4 million respectively 

The budget vetoes are a concern, but I am hopeful that we will address the funding reductions during the upcoming special session at the same time we address issues on the Governor’s special session call.  The special session call includes addressing oil and gas tax credits, restructuring the permanent fund and capping the dividend, and evaluating various tax measures to help pay for state services (this part of the call includes an income tax, as well as a newly added sales tax).  As we now look towards the next special session starting on July 11th, all of these items will need to be part of an earnest discussion on how we move our state forward and keep from falling off of the proverbial fiscal cliff.  

Had a great time on the radio July 4th with Sen. Egan and Juneau Radio Center’ s Lori James.
Thanks to everyone who participated in this year’s celebrations.

Alaska needs a sustainable path to fiscal stability.  We have some savings, but that savings will be running very thin as we move into next year.  I do support the Governor in his efforts to work on a fiscal solution this year, but do not support restructuring the Permanent Fund and capping the dividend as the first, or only, task that we need to accomplish in this next special session.  We cannot expect oil prices to rebound in the near future, so we do need to plan for a future where we have a more diverse revenue portfolio to support Alaskans and the services provided by our state government. 

If you have any questions, please don’t hesitate to contact my office.

With Regards,

Sam Kito III