Legislature(2015 - 2016)

2016-07-11 House Journal

Full Journal pdf

2016-07-11                     House Journal                      Page 3133
HB 256                                                                                                                        
The following letter was dated June 28, 2016, and received June 29 at                                                           
9:37 a.m.:                                                                                                                      
"Dear Speaker Chenault:                                                                                                         
On this date, I have signed, with line item vetoes, the following bill                                                          
passed during the Fourth Special Session of the Twenty-Ninth Alaska                                                             
State Legislature and am transmitting the engrossed and enrolled                                                                
copies to the Lieutenant Governor's Office for permanent filing:                                                                
     CONFERENCE CS FOR HOUSE BILL NO. 256                                                                                       
     "An Act making appropriations for the operating and loan                                                                   
     program expenses of state government and for certain programs;                                                             
     capitalizing funds; amending appropriations; repealing                                                                     
     appropriations; making supplemental appropriations and                                                                     
     reappropriations; making appropriations under art. IX, sec. 17(c),                                                         
     Constitution of the State of Alaska, from the constitutional budget                                                        
     reserve fund; and providing for an effective date."                                                                        
     Chapter No. 3, 4SSLA 2016                                                                                                  
     Effective Date:  See Chapter                                                                                               
As passed by the Legislature, CCS HB 256 contains a total of $8.41                                                              
billion, including $4.67 billion in unrestricted general funds. CCS HB
256 included unrestricted general fund appropriations for FY 2016 and                                                           
FY 2017.                                                                                                                        
Alaska is in a period of fiscal crisis unrivaled in state history.                                                              
Unrestricted general fund revenue has fallen dramatically in the last                                                           
two years; FY 2017's projected unrestricted general fund revenue will                                                           
cover less than 30 percent of the legislatively approved                                                                        
appropriations. The gap between spending and revenue will draw the                                                              
state's primary savings account below $3 billion, not leaving enough to                                                         
cover an additional year's deficit. This significant savings draw is still                                                      
needed even after substantial reductions to the budget.                                                                         

2016-07-11                     House Journal                      Page 3134
Even under optimistic assumptions, neither oil prices nor production                                                            
are expected to increase sufficiently to make up for these large                                                                
revenue shortfalls over the next several years. Given this reality, the                                                         
state must preserve its remaining savings. To that end, I have used my                                                          
authority to line item veto $1.29 billion from the three appropriation                                                          
bills passed (HB 256, HB 257, SB 138) during the Fourth Special                                                                 
Session of the Twenty-Ninth Alaska State Legislature. The majority of                                                           
the vetoes affect CCS HB 256, $1.28 billion of the $1.29 billion total.                                                         
In January, at the beginning of the Second Session of the Twenty-                                                               
Ninth Alaska State Legislature, my administration proposed a long-                                                              
term, sustainable fiscal plan that was balanced and fair. Because no                                                            
revenue elements of that plan have been enacted the state now has less                                                          
than one year of available savings remaining. In order to protect                                                               
Alaska's future I am compelled to make these difficult veto decisions.                                                          
Every decision was weighed in light of the long-term fiscal plan and                                                            
focused on preserving savings while maintaining balance and fairness.                                                           
Unfortunately, because the Legislature did not act on new revenue                                                               
measures, every function, including those that were previously                                                                  
prioritized and protected in the New Sustainable Alaska Plan are being                                                          
impacted to preserve savings.                                                                                                   
I am continuing to reduce the size of government. As part of my                                                                 
deliberations, I asked all executive branch departments except the                                                              
Department of Public Safety to identify additional reductions. Over the                                                         
last two years, inclusive of these vetoes ($19.6 million unrestricted                                                           
general fund and $38.6 million total funds), executive branch agencies                                                          
have reduced their unrestricted state general fund budgets by $525                                                              
million. Eleven of 16 executive branch departments have unrestricted                                                            
general fund budget reductions of 20 percent or greater. Last January,                                                          
I imposed hiring and travel restrictions and those will remain in place.                                                        
The legislative and judicial branches have seen reductions of 17                                                                
percent and five percent respectively. I have not made any vetoes to                                                            
either branch, but challenge both branches to seek additional                                                                   
The New Sustainable Alaska Plan proposed increases to existing taxes,                                                           
reinstatement of an income tax, changes to the permanent fund                                                                   
dividend calculation, and drawing a sustainable amount of  permanent                                                            

2016-07-11                     House Journal                      Page 3135
fund earnings as a stable revenue source to address the deficit. To                                                             
assure the permanent fund earnings reserve balance remains solvent                                                              
enough to enact this plan, $666.4 million of the $1.36 billion                                                                  
permanent fund dividend appropriation was vetoed. The amount                                                                    
remaining after the veto allows for a dividend of $1,000 per person                                                             
and is sufficient to meet the draw contained in Permanent Fund                                                                  
Protection Act (SB 128) recently passed by the Senate.                                                                          
Also in the fiscal plan, I proposed legislation to reduce annual oil and                                                        
gas tax credits to $100 million and capitalize a fund to cover all earned                                                       
credits to date. Although legislation was passed, the reductions are                                                            
slight and without revenue measures, funding above the minimum is                                                               
not possible at this time. The line item veto of $430 million to these                                                          
credits preserves state savings and covers the FY 2017 statutory                                                                
minimum level of $30 million.                                                                                                   
I have consistently prioritized K-12 education funding. Unfortunately,                                                          
I cannot fully insulate education from the state's fiscal challenge. The                                                        
line item vetoes affecting education have attempted to minimize direct                                                          
impacts on the classroom. To this end, there are five vetoes that total                                                         
$58.3 million, of which only $6.4 million is vetoed from the $1.21                                                              
billion K-12 foundation formula funding. The other four include: $6.4                                                           
million in pupil transportation; $4.7 million in funding to schools                                                             
outside the formula; and a 25 percent reduction in both school debt                                                             
service reimbursement, $30.5 million, and the rural schools                                                                     
construction fund, $10.4 million.                                                                                               
University of Alaska funding has also been vetoed. The $10 million                                                              
veto brings the SLA 2016 University of Alaska reduction to $25.9                                                                
million which will be challenging to manage. I commend the Board of                                                             
Regents' attention to consolidating academic programs and                                                                       
administrative functions by focusing on the strengths of the three                                                              
primary university campuses. Given the reality of the state's fiscal                                                            
situation, the number of community campuses (especially those within                                                            
driving distance of main campuses) should be reviewed. At a                                                                     
minimum, community campuses should receive local support at a level                                                             
common in other states. I trust the Board of Regents to determine how                                                           
best to allocate this reduction to preserve priority university programs                                                        
important to Alaska's future.                                                                                                   

2016-07-11                     House Journal                      Page 3136
Related to the state's higher education investment, the legislative                                                             
transfer of $80 million into the Higher Education Fund is vetoed                                                                
strictly to preserve savings. The remaining balance after the veto is                                                           
sufficient to continue the Alaska Performance Scholarship if future                                                             
appropriations are limited to the scholarship program.                                                                          
The $1.28 billion vetoed from this appropriation bill preserves nearly                                                          
$600 million of Alaska's Constitutional Budget Reserve and maintains                                                            
an adequate permanent fund earnings reserve balance to implement the                                                            
Permanent Fund Protection Act should it pass.                                                                                   
I urge you to pass appropriate revenue measures including the                                                                   
Permanent Fund Protection Act to give Alaskans and investors greater                                                            
certainty and confidence in Alaska's future. Attached is a                                                                      
comprehensive list of my line-item vetoes.                                                                                      
Bill Walker