Heated exchanges in Senate Finance Committee review of Dunleavy's budget

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JUNEAU, Alaska (KTUU) — The Senate Finance Committee saw some heated exchanges Thursday as the Office of Management and Budget director, Donna Arduin, gave an overview of Gov. Mike Dunleavy’s proposed FY2020 budget.

Sen. Bill Wielechowski, D-Anchorage, repeatedly asked for an analysis into the impacts the budget would have on Alaskans.

Arduin said that Alaska’s Chief Economist, Ed King, would present to Senate Finance soon about the budget’s spending reductions, “as well as the positive fiscal impacts of getting our fiscal house in order.”

By phone, King said he's analyzing the impact of spending reductions and the implications of a reduced Permanent Fund Dividend to the state's economy. Both would have economic consequences, and it would be up to lawmakers to decide which policy options to take, King said.

Sen. Peter Micciche, R-Soldotna, echoed that, saying that the public would need to have their input about their fiscal priorities: “We’ve heard about the importance of a full dividend, and we want to know, once they’ve looked at the totality of what’s going to happen with a $1.6 billion reduction, is that the right balance for them?”

The OMB director in her presentation to Senate Finance laid out some of the fiscal challenges facing Alaska: the Constitutional Budget Reserve is almost depleted, and Arduin said it was necessary to preserve the remaining $2 billion for emergencies and cash flow purposes.

“We don’t have the cash reserves to keep kicking the can down the road,” said co-chair of the Senate Finance Committee, Sen. Bert Stedman, R-Sitka. “We need to solve the problem either this year or next year.”

Stedman emphasized after the hearing that the goal of fixing the state’s $1.6 billion deficit should not be shifted to the local taxpayer.

“K-12 funding, or any revenue sharing options, we need to thoroughly understand it before making an informed decision,” Stedman said.

Micciche asked Arduin about the impact the budget would have on the Kenai Peninsula, which would lose $15 million in revenue annually by proposed changes to how the Petroleum Property Tax is collected. The Senator from Soldotna suggested property taxes would have to be raised to fill the gap.

“We cannot comment on how local governments are structuring, or will structure their budgets, and what they may do with their own revenues and expenditures,” Arduin said.

Wielechowski also asked Arduin about the impact that the budget might have on municipal taxes.

“The governor’s budget does not propose increasing taxes, so we have not done an analysis on increasing taxes,” Arduin replied.

The budget hearings will continue before the Senate Finance Committee Friday and into next week.