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Posted: March 15, 2012
(Juneau) - Mr. Speaker, we have before us the FY13 operating budget, CS for HB 284(FIN), and the mental health operating budget, CS for HB 285(FIN).
Building a budget is hard work. Constraining spending is even harder, but critical. We all know that oil production is declining, while at the same time entitlement programs, and retirement costs continue to drive the growth in state spending.
The price of oil needed to balance our budget was $64 dollars a barrel just three years ago. Depending on the eventual size of capital and operating budgets, it is going to take somewhere around $100 barrel oil to balance this year. That should cause all Alaskans to pause and think about what they really expect from their government in the way of services.
Mr. Speaker, part of the sobering news is we all know the recent annual growth of agency operations of 7.8% is not sustainable. I am happy to report that in this budget we've held down the agency operations growth to 3.4%.
That being said, the numbers are still staggering.
The budget in front of you is 31 million 44 thousand 700 dollars general funds below the governor's amended request.
In all funds, we are 77 million 683 thousand 700 below the governor's amended request.
In total, we are investing $6,272,043.9 of general funds and $9,497,328.0 of all funds for the services provided within the operating budget.
Mr. Speaker, any way you look at it, that is a very large sum of money.
This year the House Finance Budget Subcommittees began what we've called the "Subcommittee Revamp." We asked subcommittees to develop their respective agency budgets via a five-step process:
- Review the Mission, Core Services, and Performance Measures of each department for alignment and to ensure that what is being measured is relevant. We also wanted them to take a look at what Alaskans are receiving for their investments in agency programs. All Alaskans should expect their government to be as effective and efficient as possible.
- Review budget changes since FY2005, the last year of relatively flat budgets - this enabled us to track the GF and Total Funds changes over the eight-year period via graphs and to be reminded of and talk about prior investments and what we got for those investments in government.
- Review the 10-year plan - this highlighted the future budget changes anticipated by the agency, for instance, some agencies have shown their expectations of federal funding reductions with an associated backfill of general funds
- Review audit findings made by the Division of Legislative Audit - this highlighted areas where improvement was or is needed and the agency's response to those findings
- Get a status update on budget changes approved for FY12 - this indicated the agency's responsiveness to changes incorporated in the current year budget; for example; are projects started, are positions filled, are backlogs being processed more quickly, etc.
Then, after looking at the mission and measures, looking back, looking forward, and looking at current year progress, subcommittees got a good feel for what agencies do, why they do it, what it costs and the results we have received for our investments before discussing any new investment in the agencies.
I'd like to thank David Teal and everyone at Legislative Finance for assisting in making the 'Revamp' possible.
I'd also like to thank Karen Rehfeld and the staff of the Office of Management and Budget, and the leadership of the Executive Branch agencies for their willing involvement in the Subcommittee Revamp. At the January 28 mission and measures training session, 140 people RSVP'ed, and nearly half of them were from the Executive Branch. We held that Saturday training in the Terry Miller Building gym and the gym was full.
Do we have more work to do on this Revamp process? The answer, of course, is "yes." While we provided Performance Budget training to House Finance members in mid-December and offered training to all House members, staff, and to the Executive Branch agency leadership on January 28, we still need to spend more time with agency staff to ensure alignment of their mission, core services, and performance measures. We need to update performance measures to ensure they are relevant. Our plan is to continue this work over the interim and during the next legislative session.
Mr. Speaker, the finance subcommittees did a good job in a short period of time evaluating the Governor's budget proposal and made some tough choices to hold the growth of spending down.
The Subcommittees and the Finance Committee have made difficult decisions, but in the end came together and the result is the budget before us today.
Now, what does this budget contain?
K-12 education is a major portion of the FY13 budget. The Foundation and Pupil Transportation programs total $1.139 Billion General Funds. Additionally we are putting over $329 million toward teachers PERS/TRS retirement costs, up $76 million over the current year. When you add in over $60 million of GF in DEED's operating budget, we are investing over $1.529 Billion of General Funds towards K-12, or 24% of our GF budget.
Mr. Speaker, I would say that demonstrates a strong commitment of state resources to our students.
University of Alaska - The University's GF budget totals $690.9 Million - or 11% of the GF budget.
The Department of Health and Social Services total funds budget is $2.621 Billion or 27% of the entire state operating budget. HSS's GF totals $1.29 Billion or 21% of our GF budget.
In Health and Social Services, we fully funded the Energy Assistance Program (LIHEAP) at $31.7 million and Power Cost Equalization ($38.2 Million), put $360 thousand towards prevention and testing of Chlamydia and gonorrhea, $1 million to help fight the epidemic of obesity in this state, and in order to help our tobacco cessation funds be more sustainable, we cut back their expenditure by 9.1%.
Medicaid expenditures consume a huge share of the budget. The Medicaid appropriation in Health and Social Services totals $1.564 Billion, of which over one-third is GF or 9.5% of our General Fund budget.
Retirement Systems - We deposited over $613 million into the retirement systems! Another way to look at it is 9.7% of our $6.27 Billion General Fund budget.
Fund Capitalizations comprise $468.8 Million or 7.4% of the GF Budget.
The Department of Transportation & Public Facilities budget is $345.6 Million or nearly 5.5% of the GF Budget.
Department of Corrections' GF budget totals $302.9 Million or 4.8% of the GF Budget.
Debt Service is $238.8 Million GF or 3.8% of the GF budget.
So to recap, we have several large General Fund expenditure drivers in the budget. These 4 departments (HSS, DEED, DOT & DOC), along with the University, and 3 programs equal 82.5% of our GF operating budget! That leaves very little GF for the remainder of state government.
We will continue to work to reduce these drivers wherever we can. Our priorities of
Fiscal Responsibility, Responsible Resource Development, Access to Affordable Energy, Excellent Schools & Workforce Development, and Safe & Healthy Communities will help us with that task.
I'm not going to recite all of the funding increases or decreases, but do want to highlight some specific items included in the budget:
In the Department of Natural Resources, we added $3.9 Million to continue to improve efficiency of various permitting functions for land and water use. The Department has made great progress in eliminating the back-log of requested permits, and we wanted to continue that progress.
We've invested an additional $3.24 million for Gas Pipeline Work.
In the Department of Fish and Game, we added $690 thousand for Chinook salmon work and $353 thousand for permitting. In order to get a better handle on Tanana River returns, we added $590 thousand for sonar counts. In the Cook Inlet, we added $90 thousand to expend operations at the Little Susitna Weir. In SE, we added $120 thousand to Hugh Smith Lake weir operation in order to manage the fisheries in Southern SE.
In the Department of Education, we added $250 thousand for Parents as Teachers and put $250 thousand more to Best Beginnings.
The budget also includes $400 Million for the oil and gas tax credit fund and $60 Million for community revenue sharing.
To recap Mr. Speaker, we've slowed government spending down by reducing the Governor's proposal by $31.4 million in General Funds.
Even so, the FY13 operating budget totals $6 Billion, 272 million, 43.9 thousand of general funds and $9 Billion, 497 million, 328 thousand of all funds to provide the services that Alaskans desire.
Mr. Speaker, this is a responsible budget that meets the needs of Alaskans while keeping an eye to the future. If we let the historical annual budget growth of 7.8% continue, and our price and production of oil forecasts are accurate, we will have budget deficits in two years. We cannot allow that to happen.
We also cannot afford to be everything to everybody, and Mr. Speaker, I'm proud that we've held agency operations growth down to 3.4%.
We all know that oil taxes pay for the majority of our state government spending. We have what many have called the Alaska 'disconnect', where the average Alaskan doesn't have any direct connection to state spending because they don't pay much into state government. We all know there are more wants out there than we have the ability, or responsibility, to fund.
According to the Department of Labor, in 2010 we had 336,946 Alaska resident workers. Mr. Speaker, if the cost of the general fund operating budget had to be paid by Alaskan workers, each Alaskan worker would be responsible for $18,614 dollars to pay for this operating budget.
Let me say that again. If each Alaskan worker were required to pay for this operating budget, they would each owe $18,614 dollars. We all know that isn't going to happen, but looking at the size of the budget in those terms is a good way for the public to measure and watch how much their state government is investing in services. My hope is that Alaskans would think about that when they are asking us to fund services, so we can separate what is merely wanted from what is truly needed.
Mr. Speaker, I'd like to extend my sincere thanks to the members of the House Finance Committee for their work on this budget. The House Finance Committee members' work chairing the departmental budget subcommittees was the key to developing the budget bills before us today.
This budget is also the result of a collaborative effort between the majority and minority members of the House Finance Committee.
I also thank the 128 members of the public who took the time to testify during the budget development process, all of the House members who served on the subcommittees and others, including my staff and the staff of the Legislative Finance Division and Legislative Legal, who provided their unique insight and experience to assist in developing this FY13 operating budget.
Mr. Speaker, a budget is never perfect. We all have different ideas of what the priorities for investment should be. There is always a give and take and nobody gets everything exactly as they would like to see it.
We also know that this isn't the end of the process and the other body will undoubtedly make changes to these budget bills.
And lastly Mr. Speaker, We will work with the other body to come up with a savings plan for the projected surplus of $2.3 billion in FY12 and $1.7 billion in FY13. We still have the capital budget to work on, but we are committed to saving a large portion of the projected surpluses.
With that Mr. Speaker, I recommend that members vote "YES" on this FY13 operating budget CS for HB 284(FIN).
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