Governor’s budget cuts hit across the state

Governor’s budget cuts hit across the state

It’s hard to believe Gov. Mike Dunleavy is really serious about the draconian budget he introduced March 13. The cuts are severe across the state and affect almost every significant community and inter- est group, from coastal communities that depend on the state ferry system (gone, in its present form) to a state university system cut in half (essentially gutted.) The public school system would take a big hit, and the entire tax base of the North Slope Borough, in the influential Arctic Slope region (where Arctic Slope Regional Corp. endorsed Dunleavy) would be eliminated, taken over by the state.
Basically, the governor’s budget reduces total state appropriations from $6.09 billion in current year to $4.633 billion (the number is a bit larger if compared with former Gov. Bill Walker’s proposed FY 2020 budget, which Dunleavy is changing).
Some details:
• Public schools would see a $280 million reduction, mainly through a reduction in the formula that allocates state money to school districts
• The Alaska Marine Highway System would take a $98 million, or 65 percent, cut of its state support. State ferries would only be able to operate until October. The administration will also seek to privatize the system
• The university would see a $155 million cut, which would force closures of some campuses and curtailments of major programs, including workforce training and research
• Health spending would be cut $270 million, part of this through a hoped-for increase in federal Med- icaid reimbursement but also a proposed decrease in payments to medical providers to patients in the Medicaid system (which now amount to about one-fourth of the state population).
In a press briefing for the budget roll-out, state budget director Donna Arduin downplayed the em- ployment impact. About 500 state jobs would be eliminated, she said. But that did not include 320 ferry system workers, some of whom who presumably transfer to a possible new private operator, or the university system, where UA President Jim Johnson predicted a possible loss of 1,300.
One proposal by the governor may have been poorly thought-out. The plan would not allow municipal- ities to levy property taxes on oil and gas facilities, effectively reserving this tax base to the state under its current state 20-mill property tax on oil. This effectively wipes out the tax base of the North Slope Borough but what probably isn’t understood by the people around the governor is that it also wipes out the industrial tax base of the city of Valdez, where the oil pipeline terminates, and would greatly affect the Fairbanks North Star Borough and Kenai Borough, both of which have substantial petroleum facil- ities as tax base. Also, bonds sold by those municipalities backed by the industrial tax base would be in jeopardy. That likely affects a large amount of money, and will quickly get Wall Street’s attention, and would ultimately damage Alaska’s state credit because the state is basically seen as the guarantor of mu- nicipal debt. It’s known as “moral obligation” debt in financial terms.

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