Alaska’s Senate broke an impasse this week to pass a $2.8 billion capital budget.

The passage of the capital budget appears to signal an end to a stalemate between Gov. Sean Parnell and lawmakers over how to spend a budget surplus.

The previous impasse led the Republican governor to use special constitutional powers for the first time ever to adjourn the Legislature after its session hit a voter-mandated 90-day limit Sunday. He then called a special session that ends on May 17.

The main sticking point between Parnell and the Senate was about 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, which is packed with energy projects, if the Senate didn’t pass an oil tax cut.

With the Senate’s passage of the capital budget, the two sides seem to have reached an agreement.

The Juneau Empire newspaper quoted Senate President Gary Stevens, R-Kodiak, as saying that the Senate had received assurances from Parnell that he would not be vindictive with his vetoes. 

Parnell wants to cut taxes on oil companies to help 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.

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.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.