- Associated Press - Monday, February 10, 2014

JUNEAU, Alaska (AP) - Members of the House Finance Committee grilled state budget officials Monday on how realistic their 10-year budget plan is.

The plan drafted by Gov. Sean Parnell’s budget office is intended as a planning tool. The different scenarios include various oil price and production estimates and envision general fund spending of $5.6 billion a year after fiscal 2015. That’s slightly less than what Parnell initially proposed for his spending plan for next year.

Committee co-chair Alan Austerman said that doesn’t seem to fit with reality with the billions of dollars in increased costs the Legislature is anticipating or discussing.

John Boucher, a senior economist with the Office of Management and Budget, said it’s challenging to look out five years and project what Medicaid will cost, for example, or what the state will be paying for retirement.

But he said the plan does bring value because discussions are needed to decide what will have to be sacrificed if spending must remain flat to maintain reserves. “That’s the conversation, I think, and the difficult task I think that we face,” Boucher said.

Austerman, R-Kodiak, repeated his belief the state cannot cut its way to prosperity.

“This state, with a flat budget for the next 10 years, will not grow to the degree that it should grow to establish a tax base that will help carry us to the future,” he said.

Rep. Steve Thompson, R-Fairbanks, said a major portion of the state budget is personnel. With cost-of-living adjustments and other pay increases, he said it’s unrealistic to assume the state can maintain flat spending unless the state begins cutting entire programs.

“Just the increases for the personnel costs alone, I mean, that doesn’t fit with what you’re saying,” Thompson said.

Parnell’s budget director, Karen Rehfeld, said employees and departments have been made aware of the state’s fiscal outlook, which she said has helped to temper some expectations.

She said, over time, reducing the operating budget will probably mean looking at fewer employees. She said merit and other pay issues will probably be looked at as well.

“But the reality is, we’re not going to be able to continue to do business the same way and meet some of these spending targets that we’re talking about,” she said.

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