If you have not yet read the newsletter I sent out Thursday before the legislature’s vote on the operating budget, please click here. I wrote about what led to the Legislature’s stalemate and where I hoped we would land.

Operating Budget Compromise Passes Both Bodies

On Thursday night, the Legislature passed the operating budget, thus averting a government shutdown.

Operating Budget Details

The FY18 operating budget includes a $179 million reduction in undesignated general fund spending, compared to the 2017 fiscal year. It also sets this year’s Permanent Fund Dividend at $1,100.

The approximately $2.5 billion budget deficit will be covered by a draw from the Constitutional Budget Reserve (CBR) instead of withdrawing from the Permanent Fund Earnings Reserve Account (ERA). The reason why a draw on the CBR is preferable at this time is because the CBR is “cheaper money.” The ERA has returned around 11% this year as compared to a far more modest CBR return of less than 2%. By not taking money from the ERA, we are allowing the ERA to generate returns at its full potential, which could result in an additional approximately $275 million in income this year. Use of the CBR was approved through a cooperative effort by both bodies to achieve the necessary three-quarter majority vote.

Long Term Solution

Continuing to drain down our savings account is not a long term fiscal solution. Any comprehensive plan must include a structured draw from the Permanent Fund Earnings Reserve Account. I still believe that budget reductions are necessary, and I will continue to look for ways to make government more efficient. A spending cap must be put in place. We also need to eliminate cashable oil tax credits; I strongly supported the Senate version of HB 111, which would have accomplished this. Lastly, I support the passage of a motor fuel tax.

I’ve been searching for an appropriate quote about “compromise,” but nothing seems to adequately describe how I feel. I do know for certain that coming to a compromise when the two groups are ideologically opposed is extremely difficult. I give my sincerest appreciation to the legislators on the conference committee who painstakingly negotiated the budget.

What comes next?

At some point in the near future, the Legislature will resume negotiations on other important legislation such as the capital budget and HB 111, which eliminates cashable oil tax credits.

I hope you and your family and friends are enjoying our amazing Alaska summer to it’s fullest.  I look forward to hearing from you.

 
Senator Natasha von Imhof
senator.natasha.vonimhof@akleg.gov