We provide an update of the FY 2016 budgets actions (lower item this page).

The budget Conference Committee wrapped up work early Thursday afternoon and sent the compromise version of HB 57 to the House and Senate for consideration. There were no huge cuts in spending overall although some institutions, like the University of Alaska, will be significantly affected. The Alaska House of Representatives passed the budget by a vote of 31-8. The Alaska Senate passed the bill by a vote of 16-1. The bill will now be sent to the governor for approval.

(Note: We will do a deeper analysis in our private Legislative Digest reports)

In the end, not much was cut in many parts of the budget. The compromise budget totals $4.1 billion in Unrestricted General Fund (UGF) spending and sets this year’s Permanent Fund Dividend at $1,100. The K-12 Base Student Allocation (BSA) will be fully funded at $1.2 billion, the same level of funding as the current year.

This reverses the $69 million cut to education advanced by the Alaska Senate. Budget conferees did agree on an $8 million cut to the University’s $325 million UGF funding, bringing the university to $317 million. The $6 million cut to Pioneer Homes put forward by the Senate Majority was also reversed. In total, the compromise budget cuts $128.7 million from FY 2018 agency and statewide operations compared to the FY 2017 budget, according to figures provided by the House Majority.

Governor Bill Walker also added oil tax credits to the Legislature’s special session agenda. The governor amended the special session call with the oil and gas tax credit reform bill, HB 111. Legislators indicated in the conference committee their intent to and oil and gas tax credit payments this year, as is provided for in HB 111.

“That’s why I am amending the call so legislators can complete work on House Bill 111. We must immediately address the subsidies we can no longer afford. It is the next critical component of a much needed compromise fiscal plan, and it must be addressed this year. “When we have reduced PFDs for Alaskans, we cannot continue to give out millions of dollars in subsidies to oil companies,” the governor said.

The conference committee capped oil and gas tax credit payments at $57 million, which is lower than the amount allowed by statute (in the $70 million range) and expressed legislative intent that no tax credit sales to third party buyers be allowed after the end of this calendar year, with the same applying to purchases by the state of tax credits from explorers. The cessation of purchases and transfers were sought in HB 111, the oil and gas tax bill that was hung up as the regular session adjourned. The Senate had also pushed for a far larger paydown of tax credit liability but the conference committee opted for a lower payment amount.

The state has a current liability of about $700 million on oil tax credits and it is expected to grow to about $1 billion over the next year due to work underway in 2016 and 2017.


The House-Senate budget conference committee rolled through several agencies late Thursday afternoon including the Dept. of Health and Social Services and the University of Alaska. The UA budget wound up at $317 million in undesignated general funds, down from $325 in the current budget. The House had recommended status quo for the university as had the governor. A Senate Finance subcommittee initially recommended $312 million but the full Senate Finance committee dropped it to $302 million, although that number was probably for negotation.

The committee takes up education, the most devisive remaining issue, Thursday morning. At this rate the committee made conclude its work Thursday, setting the stage for possible adjournment. Legislators are likely to be called back later  in the summer to work on a revenue package

There were very modest results in state and federal offshore lease sales held Wednesday, June 21. Only one company submitted bids for tracts, Hilcorp Alaska LLC. Hilcorp operates producing oil and gas fields in upper Cook Inlet. The company submitted bids on 14 federal and six state tracts and was the only bidder.

What was significant is that this signaled a big shift for Hilcorp away from its strategy of purchasing and then renewing, through invested, aged producing fields toward an initiative toward new exploration in Cook Inlet’s offshore, a first for that company. Read the rest of this entry »

The House-Senate budget conference committee met yesterday and proceeded to close out the Dept. of Transportation and Public Facilities operating budget. The committee resumes work today at 4 p.m. (We will provide an update).

Standard and Poor’s issued a “negative watch” on Alaska’s credit rating due to the continued budget impasse and lack oa s a state fiscal plan. Here is Gov.  Bill Walker’s statement: “Today’s (Tuesday’s) announcement from S&P is both concerning and disappointing—but not surprising,” Governor Walker said. “The agency’s analysts note that we are continuing to drain our savings at an alarming rate, and have not yet enacted a fiscal plan. It is critical that we pass an operating budget for next year, and adopt a fiscal plan that does not continue our over-reliance on savings. I remain hopeful that we will be able to pull together and pass a budget and complete fiscal plan to secure Alaska’s future, and demonstrate that we take our finances and budget issues seriously. Alaskans are depending on us.”

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