Governor Sean Parnell rolled out his budget plan for the next fiscal year today. The budget proposal focuses on resource and energy development, transportation and infrastructure, public safety, military support and education.
In the coming fiscal year, the governor says he was able to cut state spending by nearly 1.1 billion and also held the state operating budget to less than one percent growth, but as the governor prepared next year’s budget proposal he had to face the facts.
Governor Sean Parnell said, “My main priority was to spend less given that we had less revenue.”
The facts, according to Governor Parnell, are that oil production and oil prices are down.
"The production decline and rising cost of producing our oil profoundly impacts Alaska's oil revenues," said Gov. Sean Parnell.
This is why the governor is trying to create a fair and balanced approach to oil tax reform.
“The bottom line is we've got to increase production,” said Parnell. “So you'll see me introduce a bill designed to do that. Designed to simplify our tax system, but to also make us more competitive as a state and increase production."
Oil tax reform is something that democratic Senator Hollis French agrees with in theory, but fears that the governor’s oil tax reform will create a problem for the budget.
“The question going forward for this year is how big of a hole will the governor's oil tax bill create in the budget,” said French. “We're basically running along right now with enough money coming in from our oil taxes to pay for state government.”
As for the governor rolling out his new budget proposal today claiming to have cut more than a billion dollars in state spending, most of which comes from the capitol budget.
“Capital spending in Alaska always goes up and down with the price of oil,” said French. “So by reducing capital spending, that's not really a cut it's just less spending for new roads, news schools, new infrastructure.”
In general, Senator French and Governor Parnell both call this budget proposal status quo, proposing a budget that totals 12-point-eight billion dollars. The Governor’s budget leaves more than $500 million in surplus revenue if the revenue of oil production and price holds, based on the current estimates.