Governor’s budget shakes business confidence

Governor’s budget shakes business confidence

Uncertainties now cause projects to be delayed

Gov. Mike Dunleavy’s proposed cuts in the state budget, which are huge, are causing a lot of anxieties. This is now also affecting business confidence to the point some projects are being deferred. For example, new treatment facilities and expansions at Alaska Regional Hospital are now on hold because of the governor’s planned cuts to Medicaid, the state-federal program that provides health care to lower-income Alaskans. A major expansion at Mat-Su Regional may also have phases delayed.

Dunleavy proposes to cut $1.6 billion from the current state operating budget of about $5 billion. However, a third of this would be costs transferred to municipalities, which would increase local taxes, and another third would be one-time draws on funds remaining in state savings accounts or from capitalization of state development corporations. The remaining third would be actual cuts in appropriations to state operating agencies. The reductions, on the scale they are being done, are needed to make funds available for the $3,000 Permanent Fund Dividend the governor promised voters.

A preliminary estimate from the Legislative Affairs Agency is that the budget cuts would eliminate about 5,000 jobs directly (i.e. not including the economic multiplier) but a better estimate is due this week in a report to the Legislature from the university’s Institute of Social and Economic Research.

Legislators are not about to accept Dunleavy’s budget, and will write their own

Sen. Natasha von Imhof, cochair of the Senate Finance Committee, told Commonwealth North, the Anchorage business policy group, that an alternative plan from the Legislature will be developed. One scenario being considered is a smaller cut of $400 million, which would leave money sufficient for

a $1,000 PFD. Whether Dunleavy would accept that is unknown. If he vetoes an alternative budget passed by the Legislature a veto override vote would require three-fourths of 60 members of the Legislature is possible, which will be difficult to achieve. The Legislature is unlikely to cave in on this, so the stage could be set for an extended budget impasse.

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