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Parnell signs budgets, makes no vetoes, lauds spending cuts

Posted: May 28, 2014 - 5:26pm

Gov. Sean Parnell signed the state operating and capital budgets Wednesday and made no vetoes in either.

Sen. Kevin Meyer, R-Anchorage, co-chair of the Senate Finance Committee, said this may be the first budget ever approved by a governor without at least something being red-lined.

Parnell said he set a ceiling for spending this year and legislators not only met it, but came in under the limit, so he was prepared to give lawmakers maximum flexibility in setting priorities.

“We still did an extensive review, but we saw nothing that caused us concern,” Parnell said at a press conference.

Spending from all sources in fiscal year 2015, the budget year beginning July 1, will be $12.78 billion, down $1.14 billion from the current year.

However, part of that, about $600 million, is a payment the state will not make next year toward the unfunded public employee pension liability.

The Legislature instead appropriated $3 billion from the state Constitutional Budget Reserve, so there is no payment for at least this year from the operating budget.

This is a one-time effect, however, because the pension liability payments will return in following year budgets, although at a reduced rate.

There are still hefty budget deficits that are projected, however. The deficit for the current year is now estimated at $1.7 billion, and a $1.4 billion deficit it estimated for fiscal year 2015.

“It’s definitely moving in the right direction,” with the deficits trending downward, Parnell said.

He said a combination of continued spending restraint and a push for increased revenues from higher oil production could eliminate the deficits at some point.

The deficits will be covered automatically from the state Statutory Budget Reserve, another savings account.

“We’ve seen three consecutive years of declining state general fund expenditures, from $8 billion to $7 billion and, now, $5.9 billion for next year,” the governor said.

Unrestricted general fund spending is a closely watched part of the budget because it is funded by unrestricted revenues, about 90 percent from oil, and is also the main source of funds for state operating agencies and capital projects. There is other spending in the state budget, such as federal funds designated for certain programs, but unrestricted revenues and spending are what the Legislature can most easily control.

Aside from reduced spending, Parnell said other major budget highlights of the 2014 legislative session include $300 million in increased school funding, $81.5 million as they state’s first contribution in a partnership with North Slope producers and TransCanada on a major gas project, and the $3 billion payment toward the unfunded liability.

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