JUNEAU, Alaska (KTUU) - Gov. Mike Dunleavy proposed using funds from Alaska’s public investment fund in his FY2020 budget to pay down the state’s $800 million debt in refundable oil and gas tax credits.
“The previous administration had not been making minimum statutory payments, we’re going to do that,” said Matt Shuckerow, the governor’s press secretary, explaining Dunleavy’s belief that the debt obligation needed to be repaid.
The fund source is the Alaska Independent Development and Export Authority (AIDEA), a publicly owned, semi-independent corporation that is tasked with making investments that “promote, develop and advance the general prosperity and economic welfare of the people of Alaska.”
Former Republican Gov. Frank Murkowski wrote in an opinion piece in the Juneau Empire on March 19, that AIDEA is critical for Alaska, bringing returns on investment back to state coffers.
“Using its financial resources for non-development purposes would defeat AIDEA’s purpose and adversely affect resource development,” Murkwoski wrote.
Using AIDEA funds to pay down state debt would be a first for the corporation. AIDEA was created in 1967 by the Alaska Legislature, and has funded projects across Alaska, most prominently in Northwest Alaska with Red Dog Mine, profits from which are deposited as dividends into the general fund.
In a presentation to the Senate Finance Committee, Tom Boutin, the executive director of AIDEA, said that the corporation has $1.32 billion in assets in its revolving fund.
The governor’s FY2020 budget calls for the Legislature to approve $254 million in payments for the refundable oil and gas tax credit program. The funds would cover the statutory limit for 2020 and pay the remainder of the payments not made under Gov. Bill Walker’s administration in FY2019.
Rep. Andy Josephson, D-Anchorage, took the governor’s proposal and offered an amendment to the budget in the House Finance Committee using the same mechanism. Josephson proposed spending $70 million in AIDEA receipts to pay down the state’s debt obligations.
“We are trying to free up the general fund source, to either spend on other items like the dividend, or to save,” he said.
Josephson said AIDEA had been on-the-record with the administration saying that it could afford the debt payments and noted his proposal was four times smaller than the governor’s.
After debate, Josephson’s amendment was approved and became part of the budget passed by the House of Representatives.
In the Senate, the idea of using AIDEA receipts for oil and gas tax credits is set for debate.
Sen. Bill Wielechowski, D-Anchorage, said he opposed the idea of using the fund source.
“The purpose of AIDEA is to create economic development in the State of Alaska, the oil tax money that is owed is not going to get us any new investment,” Wielechowski said.
Sen. Bert Stedman, R-Sitka, co-chair of the Senate Finance Committee, said three alternatives were up for debate, but expressed concerns about risking the organization’s liquidity.
“You need to be very careful when you start messing around with AIDEA, their reserves, and that you don’t actually cripple our economic driver,” Stedman said.
At a Senate Finance Committee hearing in March, Tom Boutin of AIDEA spoke about the need to deliver a balanced budget, and told committee members that the administration had spoken to the board about the proposal to use AIDEA receipts.
Immediately, the organization started looking at its minimum cash projections.
“It definitely motivated us to find alternative ways to pay down those oil tax credits and still accommodate some of the projects AIDEA has underway,” Boutin said.
Sen. Donny Olson, D-Golovin, asked Boutin whether he was concerned about the impact the governor’s proposal would have on the corporation. Boutin didn’t answer directly but commented, “If the state didn’t need people finding solutions, they wouldn’t be getting a good return on our salaries.”
Wielechowski was blunt in his analysis of what the proposal could mean for AIDEA.
“The numbers I’ve seen show very clearly that they cannot support that kind of appropriation out of their budget, that would just decimate their budget,” he said.
Shuckerow didn’t say what the exact impact might be for AIDEA but reiterated that the corporation had the “actual dollars on the books” to afford paying the state’s debt obligations.
“What AIDEA will look like if this proposal were to go through? These are part of the discussions that are going on right now,” Shuckerow said.