JUNEAU, Alaska — Alaska Gov. Sean Parnell on Thursday proposed a $12.4 billion state budget for next year that would require using $1.1 billion in savings to balance before legislators even get their hands on it.
Parnell told the Anchorage chamber gathering where he unveiled his plan that he was leaving room for legislators to add and would work with them on an overall spending target.
He said the state must live within its means, "tighten our belt" on spending and use savings to get by as oil prices have dropped. Still, he sounded an optimistic tone, saying the state is on solid financial footing.
Parnell's 2015 budget continues initiatives he's pushed since taking office, including additional funding for village public safety officers, a campaign against domestic violence, state-supported merit scholarships and addressing deferred maintenance of public infrastructure.
Bigger-ticket items include $10 million for the proposed Susitna-Watana dam, $20 million toward completing university engineering buildings, $31.5 million for school construction and a $3 billion transfer from the constitutional budget reserve fund to address the state's pension shortfall. He's called the unfunded pension liability a major driver of the state operating budget.
Parnell defended his approach toward addressing the $12 billion pension shortfall, saying it's in Alaska's interest to use some of its reserves to pay down the obligation now rather than leave that for future generations. His budget office said that approach could save the state more than $2 billion over the long run.
On the operating side, Parnell is proposing cutting 150 positions, which his budget director said were generally long-term, vacant positions.
Alaska heavily relies on oil revenue to fund the operations of state government, but production has been on a downward trend for years. Higher prices had helped mask the financial impact in recent years, but the state is now facing a $2 billion drop in unrestricted revenue as prices fell. Last year's $6.9 billion in unrestricted revenue decreased to $4.9 billion this year, and it's expected to keep dropping next year, to $4.5 billion.
Revenue department officials have attributed the decline to factors including lower-than-expected oil prices, decreased production and higher-than-expected deductible lease expenditures.
Parnell said opponents of the oil tax cut he ushered through earlier this year will try to blame the revenue decline on it. But he said that the new tax system is comparable to the old system at current prices and that it will better protect Alaskans at lower prices. Voters will decide whether to keep the tax cut during a referendum next year.
The total current-year budget is $13.4 billion, according to Parnell's budget office.