The operating budget conference committee closed out multiple big-ticket items on Monday, signaling work is quickly wrapping up on the biggest item on the Legislature’s to-do list.
The committee chose to fully fund the state’s portion of school construction bond debt taken on by local municipalities at nearly $100 million, fund the Ocean Ranger program and dealt the University of Alaska the smallest cut considered by either chamber of $5 million.
The committee also settled on a $70 million cut to Medicaid, close to what legislators say is a plausible one-year reduction for the safety net program.
Major unresolved items include funding for the Alaska Marine Highway System. The conference committee is scheduled to return to work today at 10 a.m.
School bond debt
The conference committee voted to fully fund the state’s share of school bond debt. For now, it should alleviate fears that changes in the state budget would force local governments to dramatically hike property taxes to fill the void.
Voters in the municipalities took on the school bond debt with the assurance that the state would fund a portion of the costs. The governor proposed eliminating the funding while the House voted to fund the reimbursement program at 50 percent of the upcoming year’s cost.
The elimination of the funding wouldn’t, however, remove the municipalities’ obligation to make the payments on the bond debt. It sparked plenty of concern that it would spike local property tax rates.
That proved true last week when the Fairbanks North Star Borough approved a budget with a variable property tax rate amid uncertainty over state funding for the reimbursement program. The property tax rate on $100,000 of assessed value would rise between $34 on the low end to as much as $120 on the high end, according to the Fairbanks Daily News-Miner.
Like all other items in the budget, this will still have to survive the governor’s line item veto pen before local taxpayers can truly stop worrying.
University of Alaska
Funding for the University of Alaska is one of those bigger items usually reserved for the final closeout of the budget. It was resolved on Monday when the conference committee accepted the proposed $5 million cut from the Senate. The House had proposed a $10 million cut while the governor had proposed a devastating $134 million cut to the program.
Ocean Ranger program
The Legislature has shown no interest this session in repealing the 2006 voter-approved Ocean Ranger program that puts 24-hour pollution monitoring on many cruise ships visiting Alaska’s waters and on Monday the conference committee chose to continue to fund the program.
The governor’s proposed repeal of the program has confounded many legislators as the program doesn’t require state undesignated general fund money to operate. It functions with fees levied on the cruise ships, which more than covers the cost of the program.
At a meeting early in session, Senate Finance co-chair Sen. Bert Stedman, R-Sitka, warned the administration that such a repeal was not going to be a priority for the session because it did nothing to help balance the state’s budget.
“We’re going to have to pick our fights to deal with budgetary issues that deal with our deficit. We’re going to be prioritizing what we do to deal with our budget deficit. And if we get bogged down in these things that don’t fix the problem, then it’s just going to get worse,” he said. “In my opinion, speaking for myself, issues like this may be well-intended but they’re not timely to the burn rate of cash on the table.”
While the administration said shore-based pollution monitoring is more than enough to properly monitor cruise ship activity in Alaska waters, the issue was underlined this session when Princess Cruises’ parent company Carnival Corp. was accused of seeking “to avoid unfavorable findings by preparing ships in advance of court-ordered audits, falsified records, dumped plastic garbage into the ocean and illegally discharged gray water into Glacier Bay National Park in Alaska.”
The conference committee settled on a cut to Medicaid of $70.3 million, which is near what the Legislature says is a doable cut in a single year. While the administration proposed a much steeper cut to Medicaid funding, legislators recognized little of it was practical in a single year because of federal requirements that major changes to the program be approved.
Because much of the program’s costs are driven by formula, underfunding Medicaid would only result in larger supplemental bills next year to cover the costs. It’s a problem the Legislature wrestled with under the Walker administration, too.
The impact of the $70.3 million cut isn’t immediately clear.
The House had proposed a $58 million cut rejecting the administration’s proposed 5 percent provider rate reductions ($21.1 million), transportation efficiencies ($3 million), cost of care collection ($500,000) and adult preventative dental ($8.2 million).
The Senate had accepted all of the above cuts except for the adult preventative dental cost for a $82.6 million cut.
The conference committee accepted the Senate number, reducing it by $12.3 million for the $70.3 million cut.
The conference committee changes will help ensure both the House and Senate approve the changes, but the final number that goes into play will depend on the governor’s veto and potential override by the Legislature.