- Associated Press - Monday, March 14, 2016

JUNEAU, Alaska (AP) - The Alaska Senate passed its version of the state operating budget Monday, on the heels of House passage of its own plan last week.

Meanwhile, Gov. Bill Walker said a fiscal plan is needed this year to address the multibillion-dollar deficit Alaska faces amid chronically low oil prices.

“To continue to drag the black cloud of deficits over the top of the state of Alaska for the next several years is not a plan,” he said Monday, adding later: “The urgency is to do it this year so we can get on with our future.”

Here is a look at how elements of the plan compare and what’s next.

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WHAT ARE THE PROPOSALS?

The plans would cut between $282.7 million and $345.3 million in unrestricted general funds from state agencies compared to the level of spending authorized at the start of this fiscal year. That’s on top of cuts approved during a drawn-out budget fight last spring. Legislators tend to focus on unrestricted general funds because that’s where the state’s deficit is. Overall spending also would be lower as the plans currently stand.

In some cases, legislators have proposed fees to replace a portion of general fund spending, such as a $100-per-year fee to be on a waiting list for Pioneer Homes, the state-run elder living facilities.

Legislators also have proposed using money from the Alaska Marine Highway Fund to backfill cuts in general fund spending next year. That fund contains leftover revenue from the state-run ferry system. The move has been billed as way to limit disruptions as the system plans for next year.

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WHAT ARE SOME OF THE DIFFERENCES?

The House used excess funds from a program that provides assistance for rural areas faced with high electricity costs to cover part of state costs for the university system. It also proposed capturing still-available reserve dollars this year to help with education and teachers’ retirement costs. But it faced criticism for that approach. The Senate plan opts to fund those obligations for next year with general funds. Senate Finance co-chair Pete Kelly said he wanted the budgeting process to be as simple as possible.

The Senate proposed taking $342 million in reserve funds still available this year to make additional contributions toward the state’s obligations for the public employees’ and teachers’ retirement systems. The idea is to try to lower those costs in the coming years.

The Senate removed an estimated $896 million for inflation-proofing the Alaska Permanent Fund next year; the House included that. The fund sees inflationary growth for most of its assets, a spokeswoman for the Alaska Permanent Fund Corp. has said.

Other big differences: the House cut the university system more deeply than Gov. Bill Walker or the Senate recommended, and the Senate suggested a $100-million cut spread among executive branch departments - an action that a legislative attorney, in a memo to Juneau Democratic Sen. Dennis Egan, said likely would be found to be an unconstitutional delegation of the legislative power to appropriate state funds.

Kelly, R-Fairbanks, indicated that line item could be a placeholder as other bills aimed at cutting costs work through the system. If those pieces don’t come together, legislators will need to discuss unallocated cuts, he said.

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WHAT’S NEXT?

Differences between the budgets that pass each side will need to be ironed out by negotiators. Legislators also will need to decide how to pay the bills.

The fall revenue forecast estimated total unrestricted revenue for this year and next at $1.6 billion and $1.8 billion, respectively. The forecast for the current year, which ends June 30, was based on an annual average North Slope crude price of $50 a barrel. Since August, the price has rarely hit that level and more recently has traded in the low- to upper- $30 range.

Walker has proposed tax increases, reinstituting a personal income tax and a restructured use of Alaska Permanent Fund earnings, a move that would change how the annual dividends most Alaskans receive are calculated.

Legislators said they’d turn their attention to revenue bills once the budgets were passed, saying their constituents expected them to cut first.

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WHAT ELSE IS THERE?

Lawmakers are banking on bills still working their way through the legislature to reduce costs in Medicaid and the criminal justice system. They also have to figure out what to do with oil and gas tax credits, which have grown into a major spending item.

The credits are addressed only with minimal funding in the budgets currently. All three would impact the budget.


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