Tourism, courts, pensions, oil tax credits: Where Alaska Gov. Dunleavy wants to spend more cash

Mike Dunleavy was elected on a pledge to cut the state budget. But his proposal still finds room for budget boosts for a handful of items, from state courts to oil tax credits to a Denali State Park visitors center.

Gov. Michael Dunleavy leaves the House chambers in Juneau after delivering a speech last month. (Photo by Skip Gray/360 North)

You’ve probably heard a lot about the programs that Gov. Mike Dunleavy is proposing to cut from his budget, like education, health care and state ferries.

But you might not have heard about how Dunleavy is also proposing to increase spending on a handful of projects and programs.

His plan released last week still found room for budget boosts for a handful of items. They represent some of the governor’s core priorities, like public safety and criminal justice, along with non-negotiable obligations, like the system that pays pensions to retired teachers and other public employees.

There was even a big new project in the state capital budget: a $25 million, 15,000-square-foot visitor center for Denali State Park.

It’s designed to give people better access to the southern part of Denali, so they don’t have to drive from Anchorage all the way to the national park entrance in Healy.

“It would be a day trip from Anchorage for people to come up and experience the Denali country,” said Matt Wedeking, a top state parks official.

In the operating budget, Dunleavy proposed a slight spending boost for the state court system. Alaska’s courts, in response to the state’s huge deficit, have been closing on Friday afternoons. The proposed spending increase would allow them to reopen.

But that $3 million boost pales in comparison to a couple of the other increases in Dunleavy’s proposal.

One is spending $37 million more, or about 14 percent, on Alaska’s public employee pension systems. Those pensions are constitutionally promised to retirees, and the payments needed to fulfill those promises are forecast to nearly double over the next decade.

Dunleavy unveils his budget to reporters at a news conference last week. (Photo by Skip Gray/360 North)

Another proposed spending boost is for cash tax credit payments owed to oil companies — reimbursing them for expenses they racked up while looking for oil and developing projects.

Dunleavy proposed to retroactively spend $84 million in the current year’s budget, on top of $100 million dollars that’s already set aside. Then, he proposed to spend $170 million more next year.

“This is our obligation. There’s a number of things that happen if we don’t do this. So we’re going to continue on with making the statutory minimum,” said Matt Shuckerow, a spokesman for Dunleavy.

Shuckerow is right that there’s a state law setting out how much the oil and tax credit payments should be each year. But there’s also a law that dictates how much money the state should set aside to pay for each student at Alaska’s schools — and Dunleavy’s budget did not follow that law.

Maintenance of the state school system is also a constitutional requirement, just like the payment of promised pensions. But Shuckerow said that there’s a clearer process for determining the size of the annual pension payments.

“Those are not, necessarily, negotiated. The number is not something that is arbitrarily found,” Shuckerow said. “There’s actual calculations done on an annual basis based on participation, beneficiaries, actuarial analysis. If the cost of health care goes up, then the spending increases.”

Shuckerow was suggesting that the payments to the pension system are typically guided by nonpartisan analysts and aren’t the subject of much debate in the Legislature. Schools spending, by contrast, is typically more political and subject to negotiations between lawmakers and the governor.

One other wrinkle to Dunleavy’s proposed oil tax credit payments: He wants to make them with money from the Alaska Industrial Development and Export Authority, the state’s economic development arm.

That means the payments wouldn’t show up as an increase in spending from the unrestricted general fund — the category that state lawmakers and experts typically use to measure the state budget. It’s effectively “invisible money,” said David Teal, the Legislature’s head budget analyst.

“It appears as savings or a budget reduction,” Teal said.

Asked about the use of money from AIDEA, Shuckerow said Dunleavy is being “open and up front and honest about where we are.”

“I don’t think there’s any secret that the governor’s budget is speaking honestly about our financial standing,” he said.

But when Dunleavy served in the state Senate, he was skeptical of similar proposals to reduce general fund spending by using other sources of money.

As for the Denali visitor center, which would also be paid for primarily with AIDEA money, Shuckerow said the project aligns with a Dunleavy administration priority of encouraging growth. It also leverages a donation from Princess Cruises, and it’s projected to generate cash for the state.

Walt Monegan, former commissioner of public safety. (Photo by Graelyn Brashear, Alaska Public Media – Anchorage)

But not everyone was convinced that the new project is the best use of limited state money for capital projects. Walt Monegan was the public safety commissioner for the previous governor; he resigned when Dunleavy was sworn in.

Monegan said in a phone interview that he was disappointed to hear that Dunleavy cut some of the previous administration’s ideas out of the capital budget, like a new plane for first responders.

“Our tourists can’t enjoy all that Denali has to offer if we can’t get them there safely. Or if there is an issue that happens up there, how do we respond to get them out of there?” Monegan said. “I would put that enhanced visitors center as a nice-to-have, as opposed to a must-have.”

The Legislature is currently reviewing Dunleavy’s budget plan in committees, and lawmakers have the power to boost or reduce his proposed spending levels.

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