Homer Alaska - Business

Story last updated at 9:05 PM on Wednesday, March 9, 2011

Senators to fight new formula, still taking requests



By Andrew Jensen
Morris News Service - Alaska

There will be a different kind of March Madness going on in Washington, D.C., this month as Congressional Republicans and Democrats attempt to agree on a spending package that will keep the government running through the end of the fiscal year.

In a visit to the Alaska Journal of Commerce Feb. 22, Sen. Lisa Murkowski said her staff uses the term "March Madness" to describe the wave of constituents representing communities and organizations who descend on D.C. to press their funding needs each year.

Any special requests won't be going anywhere, however, now that Senate Appropriations Committee Chairman Daniel Inouye, D-Hawaii, has stated he will not accept earmark requests for the next two years.

That doesn't mean Murkowski is turning a deaf ear. On the contrary, she said she has told Alaskans that, "know we won't be submitting your priorities, but as your representative, I need to know what they are. I need to be working with you to advance your priorities."

While much of the focus of the short-term cost cutting has focused on low-hanging fruit like earmarks, the long-term fight over major federal obligations such as entitlements and transportation figure to be where the real fight will be for Alaska's congressional delegation.

The state has budgeted for $845.6 million in federal transportation funds and $871 million in Medicaid funds for fiscal year 2012. Changes in Medicaid eligibility are causing budget crunches around the nation; in Alaska, the state may be required to come up with another $123 million to cover its matching obligations.

Per capita federal spending in Alaska also is exemplified by transportation funding, and any changes in the formula would have a tremendous impact on a state one-fifth the size of the Lower 48 with a road system smaller than that in Rhode Island.

Alaska's receipts of federal funds have been under fire since 2005, when the infamous "Bridge to Nowhere" came to light following the Hurricane Katrina disaster as Congress sought funds to meet the recovery needs of the Gulf coast.

Murkowski also spoke about fighting for Alaska as its federal funding comes under near-constant attack.

"By golly, I'm going to work for those federal dollars that come to our state and I'm not going to apologize for any of those efforts," she said. "I'm going to continue to make an awfully strong argument that when it comes to energy infrastructure and transportation, that is an obligation of the federal government."

The House and Senate were expected to reach an agreement on a brief extension of the continuing resolution to keep the federal government operating while a budget for the rest of the fiscal year that achieves meaningful spending cuts is crafted.

The question is no longer whether to cut the budget, but where and by how much. That represents a seismic shift in the way Washington has operated in Murkowski's eight years in the Senate.

"This is entirely different," Murkowski said. "The conversations are bipartisan. People are really quite concerned about our levels of debt and what we're going to do about it. When you have (Republican) Tom Coburn and (Democrat) Dick Durbin agreeing to focus on an issue like entitlement reform, it speaks to the extent of the problem."

Calling much of the cost cutting "indiscriminate," Murkowski said she did not expect the Senate to come close to the $60 billion in cuts approved Feb. 18 by the House of Representatives for the final seven months of the fiscal year ending Sept. 30.

"The Senate is not going to go along with the full extent of the House cuts," she said.

Spurred by an upstart freshman class of more than 80 Republicans, the new blood forced its leadership to hold to its 2010 campaign pledge of $100 billion in cuts for its first budget. The cuts approved are the pro-rated equivalent of $100 billion for a full fiscal year.

"I don't know how to say this without sounding derogatory, but I think it was so important to them to meet this milestone that sounded really impressive," Murkowski said. "They were talking about half of this initially, and some of the newly elected said, 'no, no, no, that's not nearly good enough. We're going to be cutting this incredible amount and by gosh we are going to meet that goal.'"

With the debt ceiling of $14.3 trillion fast approaching -- requiring Congress to approve an increase to keep the government going -- Murkowski said Republicans are simply not going to agree to an increase in the debt ceiling without structural budget reform.

"Nobody on the 'R' side is willing to take on that price unless there are some real and meaningful reductions in spending and an effort to almost put a straightjacket on our ability for unlimited spending," Murkowski said.

The capital markets will be watching closely to see what kind of spending restraint Congress enacts. Failure to adopt real reform could send the cost of U.S. debt -- until now relatively low as investors accept low returns in exchange for a safe investment -- spiraling upward and thereby put interest rates for all borrowers through the roof.

Murkowski supports a Constitutional balanced budget amendment and is a co-sponsor of the effort along with Sens. Orrin Hatch, R-Utah, and John Cornyn, R-Texas. Even though ratification would take years, Murkowski such a move would reassure markets.

"In terms of sending a signal, it does very clearly send a signal," she said of a Constitutional amendment. "So a lot of what you may see is not an, 'a-ha, we've reduced spending by $50 billion.' But what we have done, the Congress, has clearly committed to reductions in spending and dealing with the debt, and this is how they're doing it."

Fellow Alaska U.S. Mark Begich agreed that bond markets need a strong signal that Congress is serious about getting its deficits under control.

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