- Associated Press - Tuesday, January 20, 2015

JUNEAU, Alaska (AP) - The Alaska Legislature convened Tuesday for a session expected to focus heavily on the state’s budget deficit, a shortfall that has been made worse by falling oil prices.

The mood on the opening day was lighthearted and marked by ceremony with members elected last year sworn in by Lt. Gov. Byron Mallott. But the task at hand over the scheduled 90-day session - chipping away at a budget hole projected to be at least $3.5 billion this year and next - loomed large.

“The issues we face as Alaskans are significant, and they are likely to be history-making,” Mallott told representatives.

Gov. Bill Walker and legislative leaders say they want to make cuts and find efficiencies within state government, while dipping into savings to help get by, before considering new taxes or tax increases.

Sen. Pete Kelly, co-chair of the Senate Finance Committee, said this could end up being a time that is remembered as good for Alaska because it will force the state change how it operates. Kelly, R-Fairbanks, said abundant funds have always stalled talks on ways to curb spending. He said the goal now will be to improve the state’s finances while protecting vital services.

Many lawmakers see the next best hope for new revenue in this oil-dependent state to be a major liquefied natural gas project, which would be years away, if it is built, and would require a huge investment from the state.

Walker is expected to release specifics of his budget plan this week. The governor, who took office with Mallott on Dec. 1, is scheduled to address a joint session of the Legislature, and Alaska residents, in the State of the State address Wednesday and the State of the Budget address Thursday.

His budget director Pat Pitney said “small amounts that address key priorities” could be added to the stripped down capital budget Walker submitted as a placeholder last month. She didn’t elaborate.

Despite a strongly worded opinion piece this month in which Walker said Alaska is expected to pay out $100 million more in oil and gas production credits than it takes in in oil taxes this year, Walker said he is not planning to reopen the oil tax debate.

He said the credit issue may be addressed in this session, but he said that may not involve legislation. Several lawmakers also have said the topic is worth discussing.

He said sometimes it’s a matter of talking with the companies applying for credits or that have projects to make sure that what they’re doing is aimed at more production. He said he wants to make sure he understands the situation and doesn’t want to overreact.

Sen. Bert Stedman, R-Sitka, said the oil tax system is out of balance, but he’s not planning an oil tax bill this session. “I guess it’s a political balancing act of when and if the administration wants to deal with it,” he said.

Stedman opposed the current tax structure but also had problems with the system it replaced.

The longer the state waits to make adjustments, the harder it will be, he said. The revenue issue will become more emotional as budget cuts are made, he said.

He said you can’t get a good policy when you’re in “reactionary mode.”

There are eight new members of the House and two new state senators, both of whom are former representatives. Republicans are in the majority in both chambers.

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