The Capitol Report 4/15/16: UA Budget updates

The Capitol Report - April 15, 2016 By Chris Christensen, Associate Vice President for State Relations

Today is the 88th day of the legislative session. We finally have news on the operating and capital budgets, and it is not good.

Operating Budget The conference committee for the operating budget finally began its work yesterday, much later than normal. This committee is charged with reconciling the House version and the Senate version of the operating budget. It has six members: House Finance Committee Co-chairs Mark Neuman and Steve Thompson; House Finance minority member Les Gara; Senate Finance Committee co-chairs Pete Kelly and Anna MacKinnon; and Senate Finance member Lyman Hoffman.

As you will recall, the House proposed a $50 million dollar cut from the current year's budget, while the Senate proposed a $25 million cut. Unfortunately, the conferees voted 5-1 to adopt the larger House cut. Representative Les Gara was the no vote.

While the session is scheduled to end on Sunday, there is no expectation that the legislature can actually complete all the things it is working on by then. It is assumed that the session will extend for a period of time, and then we will have a special session. Last year, the budget wasn't actually finalized until late May. One of the things that will affect the final budget is the need to get a three-quarters vote of the House and the Senate to access savings in the Constitutional Budget Reserve (CBR). The $4.1 billion deficit in FY16 exists because state spending exceeds revenues by that amount. In order to cover next year's projected deficit, the legislature needs to take money out of the CBR, and the constitution says that it needs a supermajority to do that. The Senate majority is large enough to provide a three-quarters vote in that chamber. However, the House majority is less than three-quarters of that body; in order to get enough votes, the House majority needs votes from the House minority. This means that the House minority gets a say in the final budget. The same situation existed last year, and in exchange for the minority providing the needed votes, the majority agreed to add more money to the operating budget, including more money for the university. Following yesterday's vote in conference committee, House minority legislators said that they would make the university budget one of their priorities in negotiations with the majority.

The conference committee's action is bad news, but things aren't over yet.

Capital Budget The governor's capital budget proposal for FY17 was very small, and contained only $188 million in general funds for capital projects. $10 million of that total was for the university, to spend on deferred maintenance. The Senate Finance Committee has finally released a draft capital budget, and it dramatically reduces the governor's proposal. The Senate wants to spend only about $150 million in general funds, and the university's funding was removed. The rationale for removing the funding was that the university still has unspent funds from previous budget years available for deferred maintenance. We had also hoped that the Senate would provide some money to continue work on the UAF engineering building, but that didn't happen. The capital budget will go to the House once the Senate has passed it, but that body is under the same budget pressures and significant additions are unlikely.

Thank you for all your work to promote and support the University of Alaska!

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The Capitol Report, written by Chris Christensen, UA Associate Vice President for State Relations, is designed to keep the University of Alaska community informed about the current legislative session, particularly its impact on the university budget. Subscribe to the SupportUA mailing list to receive upcoming reports and view the archive at alaska.edu/state/report. Each new issue of The Capitol Report will also run in the following day's Seawolf Daily.

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