SAN FRANCISCO — Alaska’s governor and lawmakers are at loggerheads over a proposed budget, except unlike in most other states, this debate is over what to do with extra cash.
Due to a surplus of tax revenues generated by high oil prices, lawmakers will likely refrain from approving any new bonding authority for the next fiscal year and are also likely to defease some existing debt.
Deven Mitchell, Alaska’s debt management director, said the House has introduced an amendment that would take $150 million of general obligation authority off the books and fill the hole with cash.
The Legislature last year signed off on a $397 million GO package, mostly for schools and universities, that voters approved in November. The state sold $200 million of bonds using that authority in December.
Mitchell said lawmakers have proposed defeasing outstanding state certificates of participation and a state-supported lease obligation issued by Anchorage.
He said the budget may also include debt service for previously authorized bonds that may be sold in the upcoming fiscal year.
“There has been a use of GO debt over the last couple years, although a relatively modest use,” Mitchell said.
But nothing is certain until the state’s politicians finish wrangling over the final legislation.
The budget impasse between the House and Senate led Republican Gov. Sean Parnell to use special constitutional powers for the fist time ever to adjourn the Legislature after it hit a voter-mandated 90-day limit Sunday. He then called a special session that could last 30 days.
The main sticking point is between the governor and the Senate over proposed oil tax cuts. The Senate put language in the budget bill that would kill funding for all proposed energy projects if the governor vetoed a single one. Parnell had threatened vetoes to the $3 billion capital budget, packed with energy projects, if the Senate didn’t pass an oil tax cut.
With a $3.4 billion surplus recently projected by the state revenue department because of high oil prices, lawmakers are considering a fiscal 2012 operating budget of around $9 billion.
Parnell wants to cut taxes on oil companies in an effort to increase production and thus economic activity in the state. Some oil executives and politicians have expressed fears that the Alaska oil pipeline could shut down in the near future without more oil production.
“I see no facts that would lead me to conclude that Senate majority members are interested in increasing oil production,” Parnell said during a press conference Sunday.
However, The Senate majority caucus, a mix of Republicans and Democrats, has been skeptical of the governor’s proposal, saying the tax cut must be thoroughly vetted for benefits.
“Many of us respectively disagree with giving up $2 billion in oil taxes without knowing what we get in return,” said Senate President Gary Stevens, a Republican, in a speech to senators last week.
In November, Moody’s Investors Service upgraded Alaska to Aaa. Fitch Ratings and Standard & Poor’s both rate the state’s GO bonds AA-plus.
Moody’s noted in the upgrade that the state has $14 billion in reserves — enough to pay for almost three years of operating expenses. Alaska’s primary revenue source is oil taxes, and Moody’s credits Alaska for using recent windfalls to rebuild its budget reserves.