As legislators make cuts to the state’s budget, they’re looking to draw money from various state funds to cover costs. But changes drawing money from the fund to help rural Alaskans pay utility bills – and cutting money to local governments — are raising concerns.
The House Finance Committee is considering a budget bill that would cut state government spending $418 million more than the $100 million in cuts Gov. Bill Walker proposed.
House Bill 256 would change the source of funding for two budget items. A $76.7 million payment to the Teachers’ Retirement System would be paid from a fund for college scholarships and grants.
And $24.7 million for the University of Alaska would come from the Power Cost Equalization Fund, rather than the operating budget.
Big Lake Republican Rep. Mark Neuman said the proposal draws on available funds to meet the committee’s priority: balancing the state’s budget. Neuman is the committee’s co-chairman.
“We’re still in the first innings here,” Neuman said. “We’re trying to make sure we’re setting up the budget for the final decisions that we have to do.”
The Teachers’ Retirement System would receive money from the Higher Education Investment Fund, which was started four years ago with $400 million. It was launched to fund Alaska Education Grants, which are for post-secondary students with unmet financial needs and Alaska Performance Scholarships for students with high grades.
If the state draws out similar amounts annually to the proposed $76.7 million, the fund would be exhausted in a few years. Neuman said he expects all current grant and scholarship recipients to continue to receive the money.
The $24.7 million for the university is a small share of the overall $900 million Power Cost Equalization Fund.
But the proposal concerns Newhalen resident Evelynn Trefon. She’s a board member for a small regional electric co-op, whose customers benefit roughly $90 per month from cost equalization.
“Power cost equalization was set aside as a fund to help rural Alaskans and it wasn’t designed to help the University of Alaska,” Trefon said. “They need to look at the budget situation and figure out their own source of revenue funding. And power cost equalization is essential for rural Alaskans.”
Neuman said drawing money for the university this year shouldn’t have any effect on PCE payments.
“This was excess funds. It’s funds that weren’t needed to make the mandatory, statutory payment for power cost equalization,” he said. “It has no effect on paying PCE or any future payments.”
The House Finance Committee also cut a $35 million payment that Walker planned for community revenue sharing. If this change is kept, it would be the second straight year that the state didn’t add money to the revenue sharing program.
Without more money, the program fund would be so low that there could be no revenue sharing in two years.
Alaska Municipal League Executive Director Kathie Wasserman is concerned about the issue. She noted that rural areas depend on the money to provide basic services.
“The large communities – it will impact them. The small communities, it could devastate,” Wasserman said. “And then, when you look at the other cost shifting that is going on, due to the budget crunch that we have, I’m not sure how some municipalities are going to make it through.”
Neuman said he’s aware of the concern, and the committee would like to make changes that would make revenue sharing more secure.
“Everything is on the table right now,” he said. “I’m certainly cognizant of the needs of a lot of the communities in the state of Alaska, particularly the small, rural villages across Alaska, and their ability to do their governmental functions. And, yes, we’re certainly taking those under consideration.”
The committee also cut $25 million from the Public Employee Retirement System. That money could be restored in the next week based on the details of a state actuarial analysis of the pension obligations.
And it proposed a cut of roughly $25 million for the AKLNG pipeline project. Committee members want more details about how the money would be spent before budgeting it. Walker asked for the money to prepare the pipeline’s front-end engineering and design work.
This week, the committee has been hearing public testimony on the budget from residents statewide, ahead of a vote on the budget. It would then head to a vote by the full House before being considered by the Senate.