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Governor Parnell Delivers on Spending Limit

June 29, 2011, Juneau, Alaska – Governor Sean Parnell today signed into law three appropriation bills containing the Operating and Capital budgets, and the Mental Health Operating and Capital budgets.

During the legislative session, Governor Parnell set a spending limit. Today the governor exercised his constitutional line-item veto authority to reduce state spending by more than $400 million to meet that target.

“Given the uncertainty in our national economy and declining oil production, I felt it important to impose more fiscal discipline over the state’s checkbook,” Governor Parnell said. “Still, the state budgets for the next fiscal year promote economic growth and opportunity for families, and focus on Alaska’s constitutional priorities – Infrastructure, Resource Development, Education, and Public Safety.”

As enacted, the operating and capital budgets total $11.4 billion, including $6.9 billion in state general funds. State operating budget growth has been limited to 2.9%. The budget covers the cost of statutory increases in K-12 education funding and Medicaid formula costs, retirement system unfunded liability, debt service costs, and employee contracts.

The capital budget, which focuses heavily on energy projects, totals $2.8 billion, includes $1.6 billion in state general funds. Projects in support of infrastructure development, including energy total $2.05 billion; education across Alaska total nearly $300 million, and public safety total more than $265 million.

Interactive Budget Map
Budget Information by Community

Jobs and Economic Development

This budget includes more than $1 billion for energy projects, including hydroelectric generation and transmission, renewable energy grants, weatherization, home energy rebates, and power cost equalization.

”This budget continues to focus on creating jobs and economic opportunities for Alaskans,” Governor Parnell said. “Affordable power opens the door to responsible, sustainable development, and viable communities.”

The capital budget also contains $1.24 billion for transportation, including highways and aviation projects; $87.1 million for water and sewer projects; $297.9 million for K-12 education and university projects; and $114.2 million for deferred maintenance projects. The Susitna hydroelectric project is funded at $65.7 million. The Port of Anchorage and Point MacKenzie Rail Extension received $30 million each, while $44 million is included for the Tanana River Bridge.

Save for the Future

The budget places over $3.0 billion in reserves, including $1.1 billion into the Statutory Budget Reserve; over $1.0 billion to forward fund K-12 education; $400 million each for the Alaska Performance Scholarship fund and Power Cost Equalization fund; $200 million for in-state gas line development; and $60 million into the marine highway vessel replacement fund.

“These specific deposits along with spending reductions will result in over $15 billion in various savings accounts,” Governor Parnell said. “With declining oil production, a shaky national economy and an unfunded pension liability of about $11 billion, beefing up savings and managing them well is a key element of fiscal survival.”

Operating Budget Reductions

The Legislature included funding in the budget to buy-down $199 million of previously authorized debt and lease financing, which reduces the state’s annual debt service cost in FY 2012 by $12.1 million.


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