July 1. 2002
Monday - 6:20 pm

Juneau - Lamenting the Republican-led Legislature's passage of a short-sighted budget package that promotes one of the most expansive capital construction budgets in recent memory while it neglects basic state services such as highway maintenance, state park operations, public safety, homeland security, and full funding of programs to serve kids and families, Gov. Tony Knowles on Friday signed into law the state operating, capital, and comprehensive mental health budgets for state fiscal year 2003, which begins on Monday, July 1, 2002.

The FY2003 budget includes $2.4 billion in state general funds, $2.3 billion in federal funds, and $2.4 billion in other funds (including inflation-proofing and dividends, among other items), for a total budget of $7.1 billion dollars. Because the Legislature did not approve Knowles' long-term fiscal plan or come up with its own plan that identified sufficient revenues to fund this budget, a draw on the Constitutional Budget Reserve of $859.4 million is necessary to balance the state budget for FY2003 as required by law.

"The FY2003 budget I introduced last December would have held the line on state services while increasing resources to meet certain goals which I believe Alaskans share: quality education, public safety, homeland security, reducing the burden and cost created by alcohol abuse, and economic growth," said Knowles. "The legislature's final budget for FY2003 falls far short of these goals."

In signing the budget bills, Knowles used the line-item veto powers of the governor's office to erase some of the Republican-led Legislature's worst abuses of spending power.

"Over and over, the majority justified their cuts to basic services - including road and airport maintenance, parks and public safety and the like - by saying there wasn't enough money to hold the line on these services," said Knowles. "But if a lack of money were a reason, why did the appropriations in some areas of the budget exceed next year's needs?"

According to the news release, between the operating and capital budgets, the Legislature deposited $14 million more into the debt retirement fund than is needed for next year's debt payments, raiding the International Trade and Business Endowment and the Tobacco Education and Cessation Fund. Knowles referred to the overfunding of the debt retirement fund and last minute unannounced manipulation of dates by applying most of this appropriation to the FY2002 budget as "an attempt to trick the public on spending levels."

According to the news release, the Republican-led Legislature also appropriated money for some $23 million dollars of legislative add-ons in home districts. Knowles vetoed what was called the worst of these, pointing out that the capital budget was padded with new projects while it overwhelmingly ignored the need to maintain facilities already built.

"The irony is that despite this capital 'largesse,' only a token level of funding was provided for one of the most basic elements of my proposed infrastructure program: deferred maintenance," said Knowles. "Whereas I proposed issuing $137 million of debt to repair, and in some cases replace, aging state facilities from Pioneers Homes to prisons, the legislature provided only $10 million toward a nearly billion dollar problem."

Knowles vetoed the following items in the capital budget (Senate Bill 2006), stating that as a package they represented the misguided priorities of "A Republican-led Legislature that claimed funds were so scarce that it had to cut public safety, roads and state parks, services available to all Alaskans, even as it funded a series of add-on projects that would have benefited only a select few." Items vetoed and comments:

$20,000 to the City of Larsen Bay for mosquito magnet units (page 6, line 32): "While I recognize the abundance of mosquitoes in Alaska, asking the state to pay for 'mosquito magnets' cannot be justified," Knowles said.

$150,000 in operating funds for the private non-profit Alaska Aviation Heritage Museum (page 20, line 9): "The group has claimed for years that it could be self-supporting and we don't even have enough funds to operate all our state-owned parks," said Knowles.

$50,000 to the Alaska Trappers Association to produce a wolf-trapping video (page 20, line 26): "An adequate video on how to trap wolves is available to the public through the Alaska Department of Fish and Game," Knowles said.

$100,000 to study the feasibility of constructing a new office building in Anchorage (page 99, line 8): "There is no evidence that this building is needed by state agencies or that the private sector is unable to provide adequate commercial space in Anchorage," said Knowles.

$500,000 to the Alaska Geospacial Information Coalition (page 138, line 22): "This constitutes a sole-source grant without competitive public bid," Knowles said. "Further, questions have been raised regarding the amount of information generated with this grant that will be available in the public domain." Knowles will direct state agencies to develop a plan outlining a process for achieving the laudable goals of improved, widely accessible mapping data.

$1 million dollar low interest loan to the community of Delta Junction for payment of its settlement agreement in litigation over the unsuccessful private prison proposal there (page 121, line 26): "The state was not a party to this litigation and there is no public purpose for state expenditures in legal settlements in which the state has no interest. The state should not be viewed as the deep pocket by private parties dealing with local governments."

$10 million grant to the Matanuska Electric Association (page 131, lines 13 and 24); a $6 million grant to the same entity was reduced to $500,000 (page 131, lines 13 and 22): "Unlike other projects funded in the capital budget from the Railbelt Energy Fund, the $10 million item appeared only at the last minute and no project justification or back-up was provided. The increase from a $500,000 to a $6 million project was also made at the last minute with no justification or back-up."

Reducing the "supplemental" appropriation in the capital budget (page 130, line 18) by $8,468,300 so the amount funded for debt service in the capital and operating budgets equals the anticipated need for next year: "The legislature appropriated more money to the debt retirement fund than will be needed next year, even as it claimed there was not enough money to maintain basic services. This was partly due to a particularly disingenuous accounting method of setting the date for the $20 million general fund appropriation so it takes effect in the current fiscal year rather than FY2003. This is clearly a maneuver to mislead the public concerning legislative spending levels."

Reducing the amount of AIDEA dividends used for Federal Aid Highway State Match by $1 million (page 49, lines 11 and 19-20): "Despite written notification from both the Legislative Finance Division and my Office of Management and Budget, the legislature over-appropriated the maximum allowable dividend from the Alaska Industrial Development and Export Authority (AIDEA) by $1 million. I do not think it is appropriate to fix this error by reducing the long-standing community capital matching grants program or eliminating state funding for subsistence activities in the Department of Fish and Game. (I do think it is imperative that the legislature switch subsistence funding back to general funds next year.) Therefore, I took the only viable alternative which is to correct the over-appropriation by reducing the amount of AIDEA dividends used for Federal Aid Highway State Match. If more matching funds are needed once final congressional action is known, the next legislature can correct this year's error with a supplemental appropriation."

$31,300 to the Legislative Budget and Audit Committee with matching federal funds assumed for the Department of Health and Social Services for a state health facilities plan (page 100, lines 6 and 31): "Although the study appropriations call for about half state and half federal funds, the federal funds will not be available and the $31,300 in reappropriated state funds will not be adequate to do the work."

$200,000 to the Legislative Council for a study of welfare and Medicaid recipients (page 108, line 16): "HSS officials told legislators Medicaid could pay half of the costs of the study if the appropriation went to HSS instead. Studies of this kind are more appropriately conducted by the executive branch."

Related Information:

Senate Bill 2006 (the capital budget), Conference CS for House Bill No. 403 (the operating budget), and Conference CS for House Bill No. 404 (the comprehensive mental health budget), along with the transmittal letters from Gov. Knowles to the Legislature explaining his actions on these bills, are available from the web site of the state Office of Management and Budget: http://www.gov.state.ak.us/OMB/AKOMB.htm.

A veto summary and fiscal spreadsheet are also available on the site.

Source of News Release:

Office of the Governor
Web Site

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