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Parnell's budget plans may mean $400 million in vetoes

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Posted: Thursday, May 26, 2011 3:40 pm | Updated: 12:59 pm, Wed Jan 16, 2013.

JUNEAU, Alaska - Gov. Sean Parnell said Thursday that it is his intent to pare the state capital budget down to $2.8 billion - meaning he'd have to trim nearly a whopping $400 million.

Parnell told The Associated Press a number of factors will guide his approach in evaluating projects, including spending that addresses life and safety concerns, maintaining existing infrastructure and building infrastructure that creates long-term opportunities. He said he'll also look at the potential for creating jobs and try to balance projects across the state.

He said state agencies are reviewing the budget and will report back to him soon on their recommendations. He said he hasn't seen a project that he dislikes on its face within the $3.2 billion budget that lawmakers recently passed. But he said it's also important that the state be careful with its money because of the volatility of oil prices.

Alaska relies heavily on oil revenues to run government. While prices are high now - and some lawmakers have said they expect billions in unexpected revenue next year as a result - Parnell said that could change quickly.

"I think it's just better to be responsible with the public's money rather than spend freely," he said.

He indicated cuts were also possible within the $12 billion state operating package.

Parnell set a $2.8 billion capital spending limit after failing to reach agreement with lawmakers on a cap. Initially, he said lawmakers must pass a bill addressing oil taxes to spend that much. The tax bill faltered in the Senate after clearing the House, but Parnell has stuck with that number, which he said will provide for an "extremely healthy" capital budget.

Senate Finance Committee co-chair Bert Stedman was among those who argued that the budget lawmakers passed wouldn't overheat the economy and that the state could afford to make the investments outlined in it now. As of early April, the state had nearly $14 billion in budget reserves.

Any cuts Parnell makes are bound to be scrutinized, if not second-guessed, especially if they affect energy projects. Senate leaders tried to protect about $400 million in wide-ranging projects from vetoes with contingency language binding those into an as-is, all-or-nothing package. This came after Parnell said he'd be forced to rein in capital spending even more if a tax bill stalled - and some senators saw this as a threat their projects could be on the chopping block. Parnell has said repeatedly he won't abuse his veto authority.

Members of the House's GOP-led majority refused to accept the language, seeing it as inappropriate, if not an infringement upon the governor's veto authority. The dispute forced the regular session into special session, with the House eventually stripping the language, passing its version of the bill and adjourning before the Senate could object, force more talks and delay a swifter end to the frustratingly contentious session.

The Senate and House bills were substantively similar though structured differently.

Included in the bill that Parnell is soon to receive is $400 million for student scholarships and aid. Parnell said he intends to begin using earnings of that amount to fund scholarships - a pet project of his - next year. But he said the Legislature's failure to pass a bill establishing a long-term fund for merit scholarships means the current set-aside has little more than a "white picket fence" around it. He worries that leaves the pool vulnerable to being dipped into by lawmakers if they want to use it for other projects.

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© 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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