Capital budget trimmed as oil tax credits total $254M

Gov. Michael J. Dunleavy’s operating budget proposal has captured the attention of the state, but his capital budget is also smaller than in years past.

At $95.7 million in unrestricted General Fund dollars, the discretionary spending portion Dunleavy’s fiscal year 2020 capital budget is the smallest in years.

More than $61 million of that would go towards generating federal matching funds, mostly from the Department of Transportation for highway and airport maintenance programs.

The administration’s capital budget plan totals about $1.2 billion when the unrestricted funds are combined with just more than $1 billion in federal money and $114 million in designated funds, which often consist of fees or other revenue sources directed for a specific purpose.

The current capital budget for the 2019 fiscal year that ends June 30 spends more than $1.4 billion from all funding sources.

Dunleavy’s budget cuts funding to the state’s Bulk Fuel and Rural Power Systems upgrades programs, which are managed by the Alaska Energy Authority.

The rural energy programs have long been capital budget staples.

They provide funds to AEA for diesel fuel storage facilities and electric powerhouse repairs and replacement in communities that lack the economic base to pay for the basic infrastructure upkeep.

Former Gov. Bill Walker’s capital proposal — submitted by the Dunleavy administration shortly after the leadership transition in December to meet a statutory requirement for a budget plan — called for a total of $10.5 million in general funds for the Bulk Fuel and Rural Power Systems programs.

That state money would have been matched with $20 million in federal grants from the Denali Commission.

The latest budget also eliminates the Alaska Housing Finance Corp.’s home Weatherization Program offering financial assistance for qualifying low- and middle-income households to increase the energy efficiency of their homes.

It was funded with a $6 million split of state and federal money in the fiscal 2019 budget, but also was not in the Walker administration’s proposal.

The Alaska Travel Industry Association is allocated $7.4 million in general funds; the same for the Department of Education’s K-12 Major Maintenance program.

Federal disaster relief funding of $4.5 million for the 2016 Gulf of Alaska pink salmon run also arrives via the capital budget.

On other fisheries projects, the budget contains $1 million for a Cook Inlet stock assessment; half of what the Walker administration had proposed, and cuts a $1.85 million allocation for Chinook salmon research.

The Walker administration’s Arctic Strategic Transportation and Resources, or ASTAR, initiative that seeks to develop a network of basic roads across the western North Slope would get $2.5 million under Dunleavy’s plan.

The University of Alaska would receive $5 million for deferred maintenance.

A $20 million appropriation for Port of Alaska repairs that Anchorage officials were hopeful for is not in the capital budget. The state approved $20 million for the beleaguered piece of critical infrastructure last year.

Oil tax credits

The Dunleavy administration is proposing to fund an additional $84 million in oil and gas tax credit payments in 2019 and $170 million for 2020.

The money would come via the Alaska Industrial Development and Export Authority’s “excess funds,” according to OMB Policy Director Mike Barnhill.

Barnhill told the Senate Finance Committee that the Revenue Department did a liquidity analysis of AIDEA’s funds and concluded the authority had undesignated money available.

The $84 million is in addition to a $100 million backstop appropriation the Legislature made last spring to pay credits this year. It would bring the total 2019 credit payments to the statutory minimum calculation of $184 million based on how the department interprets the law.

Some Democrat legislators insist the minimum payment should be much lower due to a different reading of how the state’s payment formula should be used.

The $100 million was recently disbursed to credit holders, Barnhill said, after the state’s plan to bond for nearly $1 billion to pay the credits off in one lump sum was challenged in court.

That case, with the state’s position of the bond sale being legal upheld in Superior Court in December, is expected to reach the Supreme Court.

The $170 million meets the minimum payment for 2020.

Democrat senators on the Finance Committee were critical of the plan for paying the credits contrasted with proposing significant cuts to education funding.

Sen. Bill Wielechowski, D-Anchorage, noted that the 2019 appropriation may be an item for the supplemental budget and emphasized his contention that the state technically does not need to make the payments because they are “subject to appropriation” by the Legislature, according to the law.

Barnhill said the credits are regarded as debt that must be paid even when the state is in a major financial bind.

“It is important for the state’s credit story and reputation that we manage our debts appropriately,” he said.

AIDEA spokesman Karsten Rodvik said the money would come out of the authority’s Revolving Fund and officials are discussing the plan with the governor’s office.

The authority, with a $1.3 billion net position, has several real estate development and business loan programs in which it partners with private lenders.

AIDEA also returns a dividend to the state each year; it is pegged at $10.3 million for 2020.

Elwood Brehmer can be reached at [email protected].

02/26/2019 - 9:48am