JUNEAU — Slumping oil revenue forecasts don’t have many lawmakers in the mood for a capital budget that would require dipping into the state’s savings accounts, but a co-chairman of the Senate Finance Committee said that could change if the Legislature passes an oil tax cut.
Speaking to reporters during a weekly press availability, Sen. Kevin Meyer, R-Anchorage, said he believes lawmakers would feel more secure about tapping savings for today’s projects if they believe oil production will be boosted in the future.
“If we can see in the near future — in the next three or four or five years — that there’s going to be (20,000), (30,000) or 40,000 more barrels of oil in the pipeline, then I would personally be more amenable to dipping into savings,” Meyer said.
Otherwise, Meyer said, there won’t be much support for making a withdrawal.
“We don’t want to go into savings if we don’t have to,” he said. “But on the capital side, we don’t know how much money will be available. ... It looks like we will have a shortfall this year.”
Legislative officials estimate there’s only $263 million of spending the state can add to Gov. Sean Parnell’s $1.8 billion capital budget before the state would have to tap into its savings accounts. That’s not to mention the estimated $900 million of lost revenue if Parnell’s oil tax proposal passes.
The capital budget pays for everything from roads to turf fields to major energy projects and new buildings at the university.
If the Legislature were to go over the $263 million, or if Parnell’s oil tax plan passes, the state would first tap the Statutory Budget Reserve Fund, which has about $4.7 billion. The state also has $11 billion in the harder-to-tap Constitutional Budget Reserve.
Earlier in the day, House Democratic Leader Beth Kerttula objected to touching the state’s savings, challenging the new methods the administration used to generate the more conservative revenue forecast. She added that with declining oil production, the state shouldn’t consider cutting progressivity — a tax structure that increases the tax rate as the price of a barrel of oil increases — saying the policy protects the state at high and very high prices.
“I’m not supporting going into savings,” she said. “The reality is you don’t want to cut away that progressivity. ... We don’t want to be in that position. We’re a rich state and we have to manage our resources.”
When it comes to energy projects, legislators might overcome their hesitancy to touch savings accounts.
The co-chairman of the Senate Finance Committee, Sen. Pete Kelly, R-Fairbanks, said the state needs a conservative approach to spending, but reducing energy prices in the long term merits spending now.
“Legacy projects, we have to deal with energy issues, there’s no question about that,” he said. “We’re going to have to spend money on those regardless of our situation right now, and that will probably mean dipping into our savings at some point.”
When asked his priorities for energy, Kelly said he wants to make sure a natural gas trucking plan is fully funded and said he would like to see the state continue pushing the Susitna-Watana Hydroelectric Project forward.
“The first thing would be to take on the governor’s proposal for the Fairbanks energy and look at ways of increasing it,” he said. “An energy project will have to come out of savings because the capital budget is not a huge amount. That would be a priority for me.”
Kelly also said he’s interested in helping the University of Alaska Fairbanks repair and upgrade its power plant.
Kelly’s position has been voiced by a handful of other lawmakers, namely House Speaker Mike Chenault, R-Nikiski. Earlier in the session, Chenault said the state has the money for the right projects. He said the Legislature should weigh the merits of each carefully, but said it should put money behind projects that make sense financially.
Sen. Fred Dyson, R-Eagle River, also offered his support for energy infrastructure, especially projects that are “fungible” — flexible enough to not become obsolete as new, bigger projects come online.
“Trucking natural gas or propane is a fungible solution. When something bypasses, they can go somewhere else,” he said. “It’s not lost capital investment.”
Contact staff writer Matt Buxton at 459-7544 and follow him on Twitter: @FDNMpolitics.