The speaker of the Alaska House and the president of the Senate say legislators are looking for more operating budget cuts before generating more revenue.
House Speaker Mike Chenault, R-Nikiski, and Senate President Kevin Meyer, R-Anchorage, gave the Resource Development Council a preview of the upcoming session Dec. 17.
Chenault said the House majority caucus agrees on the need to cut the operating budget and will be targeting cutting things that don’t work, downsizing and perhaps combining other things.
Typically, state reductions start with those doing the work, he said, citing snowplow operators as an example, and saying if the state can make it hard enough on residents eventually they’ll agree to whatever is proposed, including new revenue streams.
Chenault said the Legislature needs to be concerned with how the budget is reduced, and needs to look at middle management people. Straight across the board cuts don’t work because you cut the operators, he said, never getting to middle management people who have been moved up over a number of years. He said if you don’t have a place for people to move you create a place, such as writing regulations that affect business people around the state.
Chenault also said he thinks what’s on the Legislature’s plate is a “pretty big lift” and said he doubted the Legislature could accomplish its work in 90 days.
He commended the governor for putting out a variety of potential revenue streams, but said he wasn’t sure any of those would pass, although a lot of legislators know some form of revenue will be needed with lower production and oil prices.
Credits, AKLNG
Chenault said he has some concerns with proposals to cut oil tax credits because there are independents who have invested based on the tax regime in place. Tax credits may be modified, he said, but urged caution in now that modification is done, and said he’d be more interested in loan guarantees than in a loan program.
The state has good partners in the Alaska LNG project, but, he said, the administration has been managing the project for failure with its withdrawal agreement, which took a year to negotiate.
The agreement reached calls for negotiating in good faith - but getting there has caused a lot of angst among the state’s partners and in the Alaska Gasline Development Corp., he said.
As for negotiating gas agreements, Chenault said he would rather negotiate with people who want to sell gas for the most money rather than with people who want to buy gas at the cheapest rate.
He also said he hopes the bloodletting at AGDC - removal of all but one member of the original board and the president - is over and said he has faith in Dave Cruz, the one remaining original board member and the newly elected board chair.
Fiscal policy, advancement of gas
Meyer said there are significant challenges facing the next session of the Legislature and said priorities will be fiscal policy and advancement of the gas pipeline.
When the oil tax was changed in Senate Bill 21 the goal was to increase production, and with $49 per barrel oil last year and 530,000 barrels per day of production, moving to $36 per barrel this year and production at 552,000 bpd, production is on its way up.
Funding state government is a problem the whole state faces, Meyer said: If there is no reduction in spending and no new revenue measures the state’s savings will be gone in 24 months.
Reducing the budget is the first step, he said, noting that the $770 million reduction last year came in good part from the capital budget.
Meyer said the governor is proposing $100 million in budget cuts in this year’s budget and $500 million in new taxes, but legislators think that should be flipped - more cuts in the budget and fewer new taxes.
Government growth an issue
Meyer said he didn’t think the state should fill the fiscal gap and said citizens needed to keep pressure on legislators.
If we don’t reduce the budget we’ll continue to grow our government, he said, calling this an opportunity to right size.
He said he wasn’t pleased to hear Chenault talk of going beyond a 90-day session, but did say it will be hard to do everything on the Legislature’s plate in 90 days.
In addition to fiscal issues, Meyer said the next session will have gas project issues to address, including how does the state take its gas, as royalty in kind or as royalty in value; gas as tax; fiscal terms; payment in lieu of taxes.
He said AKLNG is an opportunity for the state to boost its economy, but it’s a huge project and the state needs to be careful as it moves forward, looking ahead to a project that would come online some 10 years down the road.
