January 30, 2014
The first two weeks of the session have unfolded at the usual breakneck pace. Already, more than 10 percent of the session is behind us and there is much that must be done. Governor Parnell addressed the legislature last week and set an agenda that calls for an ambitious education package, authorization to proceed with a complex natural gas pipeline agreement, and restraining state spending in the face of declining oil prices and production. Beth Kerttula stunned all of us by resigning from office to take a once-in-a-lifetime opportunity for a fellowship at her alma mater, Stanford University. I will miss her, but I am grateful for her service and wish her and her husband Jim all the best in their new adventure.
Beth’s departure has left a void in the Juneau delegation, but the beat still goes on. Below are some of the highlights of what to expect over the next 80 days.
Alaska has entered an era of declining revenues due largely to slumping oil prices and production. (For a breakdown of the revenue decline, see below.)
State general fund spending for the current budget year, Fiscal Year 2014, adds to $6.9 billion. Unrestricted general fund revenues are expected to be roughly $5 billion – a gap of $1.9 billion.
For the next budget year that starts July 1, 2014, proposed general fund spending now stands at $5.6 billion and revenues are expected to drop to $4.5 billion – which means we’ll have to tap budget reserves to the tune of $1.1 billion.
Our $17 billion in reserves will help bridge the gap until new oil production is brought on line.
As a member of the House Finance Committee with three budget subcommittee assignments – the University of Alaska, the Department of Environmental Conservation, and the Department of Health and Social Services – I will work hard to protect Juneau’s interests such as funding for the State Library, Archives, and Museum building, Juneau Access, Glacier Highway improvements, the University of Alaska Southeast, and K-12 education funding.
Oil lease expenditures are up. Although this puts a dent in our tax revenue, it also shows that oil company investments on the North Slope are picking up and will lead to development that will help slow down declines in oil production.
Here’s a breakdown of the significant drivers of the decline in FY 2015 revenue:
Lower than expected oil price and production: $1.080 billion
Increased lease expenditures and transportation costs: $745 million
See page 28 of the January 28, 2014, state revenue forecast presentation by clicking here.
When I started in the legislature in 2009, 692,800 barrels of oil flowed down the Alaska oil pipeline a day. Today, it is 508,200 barrels a day – a drop of 184,600 barrels a day in only five years.
Retirement Trust Fund
Governor Parnell has presented a plan to address the state’s $12 billion public pension unfunded liability. Without it, annual payments are expected to shoot up to $1 billion. A $3 billion transfer from the constitutional budget reserve to the Retirement Trust Fund will lower those yearly expenditures to $500 million, thus saving money in the long run and protecting state retiree benefits.
Education is a hot topic this year. Raising the base student allocation (BSA) in the education funding formula from the current $5,680 per student is but one element of this debate. There is $25 million in the operating budget to help pay for school energy costs. There also is a proposal to raise the BSA by $201 over the next three years which would increase education funding by $50 million. This is a good step forward, but I hope to see that amount increased by the time the gavel falls on April 20.
The governor is basing his support of increased education funding on passage of legislation that will:
- End the high school exit exam
- Allow students to skip classes they already have mastered by taking tests that prove their mastery
- Increase funding for charter schools within the public school system
- Reauthorize the state technical and vocational education program through 2024 to continue paying for career and technical classes and allow students to earn dual credits for high school and college
- Expand the number of boarding schools for rural students and provide tax incentives for businesses and individuals to invest in them
- Increase the state stipend for students who attend boarding schools
Governor Parnell has come out in support of a proposed amendment to the Alaska Constitution to allow school vouchers – a move that could allow public money to be spent on religious or private schools. The governor has said that his support for an increase of the BSA is not based on passage of this measure.
Alaska has reached an agreement with oil and gas producers – BP, ConocoPhillips, and Exxon Mobil – and TransCanada in which the state would have a 25 percent equity share of a gas pipeline project: a gas treatment plant on the North Slope, an 800-mile-long pipeline, take-off points in Fairbanks and elsewhere, and a liquefaction plant at tidewater in Southcentral Alaska. The entire cost is between $45 billion and $65 billion. The state’s share could range from $4.6 billion to $11.4 billion and would be paid for with the state’s 12 percent oil and gas royalty, a gross tax on natural gas of 10.5 percent, and debt financing. The legislature is expected to spend a lot of time examining this complex proposal.
The State’s New Third-Party Administrator for Public Employees and Retirees
Aetna became the state’s new third-party administrator on January 1, 2014. As with all transitions, this has been challenging. Many constituents have called my office with their concerns. One issue was the lack of preferred providers in Juneau. Bartlett Regional Hospital currently is on the preferred provider list, and we understand that Family Practice Physicians and Southeast Medical Clinic may join soon. If your physician is not on the list, you may consider submitting an Aetna Provider Nomination Form. Click here.
Please take a look at the new benefit plan booklets.
The state is accepting comments on the plan booklets until February 28, 2014. Send comments via email to email@example.com or by mail to:
State of Alaska
Division of Retirement and Benefits
Attn: Michele Michaud
P.O. Box 110203
Juneau, Alaska 99811
The state ended a popular air ambulance membership program last November that stopped Airlift Northwest, a Seattle-based air medevac service, from offering its AirCare membership plan to help people pay for the costs of being flown to Seattle and elsewhere for emergency medical care. I am working with the Alaska Division of Insurance and Southeast legislators to introduce a bill soon to change the law and help restore the program. If passed, the measure would help 3,226 Alaskans who rely on this service – a fair number of whom have contacted my office.
Alaska Permanent Fund Dividend
Have you filed for this year’s Alaska Permanent Fund Dividend? If not, remember the deadline is March 31, 2014. If you filed on-line, then you should check to be sure the state has your electronic signature. A computer glitch earlier this month prevented thousands of applicants from completing this final, vital step. To check the status of your application, go to the state’s myPFDInfo web site.
Alaska Food Coalition and Alaska Food Policy Council Town Hall Meeting
The Alaska Food Coalition and Alaska Food Policy Council will hold a town hall meeting at the Juneau-Douglas High School Commons on Monday, February 3, 2014, from 6:30 p.m. to 8:30 p.m.
They want to hear your ideas and opinions about getting more local food on the plates of more Alaskans and how to combat hunger in our state.
Please call my office anytime at 465-3744. It is an honor to serve as your representative. Returning to work for me this year are veteran aides Bonnie Gruening, Terry Harvey, and Christopher Clark.
Bonnie does a lion’s share of constituent work and more, Terry is mostly focused on Juneau’s capital budget requests and the needs of the Southeast region, and Christopher deals with work relating to the House Finance Committee.