Tough budget decisions still ahead

JUNEAU — It took two special sessions for Alaska legislators to agree to a budget after a crash in oil prices contributed to a severe reduction in the state’s available revenue.

Barring a huge rebound in oil prices, things aren’t expected to get much easier next session.

While legislators made big cuts in spending, they likely won’t be able to repeat the same level of cuts to Alaska’s infrastructure budget, for which the use of unrestricted state funds was reduced largely to the amount needed to meet federal matching-grant requirements.

Cuts to agency operations are always tough, Legislative Finance Division Director David Teal said. The lengthy legislative debate this year — which prompted preparations for a potential government shutdown — bore that out. Next year is an election year.

There was no shutdown — lawmakers passed an operating budget June 11 — and notices warning of layoffs if a budget wasn’t passed by July 1 were rescinded. But with the implementation of the new budget, the cuts put in place will start to be felt.

Gov. Bill Walker signed the operating and capital budgets late Monday, spokeswoman Katie Marquette said by text message Tuesday. The new fiscal year starts Wednesday.

Legislators this year focused on cuts and reducing the size of government in this oil-reliant state before beginning talks in earnest about ways to raise revenue.

In early June, Walker began that discussion with the public. Walker hasn’t settled on a specific revenue solution, Marquette said by email. The governor plans to continue talks with the public about building fiscal stability for Alaska and with the Legislature, to gauge its interest in the appropriate time to introduce revenue legislation, she said.

Disagreements over school funding and negotiated cost-of-living increases for union workers were among the sticking points as lawmakers grappled with the budget last session. Minority Democrats also held out to reverse or lessen cuts in other areas. Support from House Democrats was needed to access a budget reserve fund to cover costs.

The spending plan does not forward-fund education, Teal said, meaning legislators will have to come up with an education budget for the next session.

The budget included language stating the Legislature intends for the cost-of-living increases ultimately approved for union and non-union workers to be one-time raises and that there can be no such increases beginning with contracts negotiated in 2015. It suggests provisions be added to the labor agreements allowing them to be reopened if oil prices reach or fall to certain levels.

Jim Duncan, executive director of the Alaska State Employees Association, said he expects tough negotiations. His union is among those scheduled to begin talks this year with the state for a new three-year deal.

“We realize what the financial position of the state is and to expect large monetary increases or maybe even any monetary increases in the first year of the contract may not be realistic,” he said. “But on the other hand, I’m quite sure the union is going to approach it with the idea that we do not want to give up anything, we don’t want to take steps back but that we’ll work with the administration in order to address the immediate fiscal crisis, the immediate fiscal needs so that we can continue to move forward.”

With the budget cuts, it’s expected state workers will be laid off. The state plans to take advantage of retirements and attrition as much as possible to address position cuts across departments, Marquette has said. But up to 200 people could be laid off. The number was being finalized.