Alaska Gov. Uses Veto Pen to Slash State Spending

ANCHORAGE, Alaska (CN) — Alaska Gov. Bill Walker used his veto authority Wednesday to slash $1.29 billion from budget bills passed by his state's Legislature, including capping state residents' share of oil revenue at $1,000 and slashing education funding.

Walker cited the Legislature's inability to find a way to pay for fiscal year 2016 and 2017 budgets they passed without pulling from state savings as reason enough to pick up his veto pen. In addition to the $1.29 billion in vetoes, Walker ordered a halt to $250 million of spending on transportation projects.

"Drawing down from limited savings to fund the budget is not a viable plan," Walker said. "We have a $4 billion deficit, which means the status quo is not on the menu. Despite the Legislature's inaction, I'm still going to make sure Alaskans get a sustained permanent fund dividend."

In addition issuing a written statement, Walker held a news conference in Anchorage to announce and explain the vetoes in which he blamed the $4 billion shortfall on falling oil prices and dwindling oil production. He also criticized lawmakers for only cutting spending by $400 million during their 149 days in regular, extended and special sessions.

The Legislature, Walker said, solved only "10 percent of the problem" while "leaving 90 percent of the work undone."

He added that the state can no longer afford to pay out high annual oil-revenue dividends to every adult and child from the Alaska Permanent Fund, like the 2015 payout of $2,072. Walker's line-item veto reduced the $1.362 billion permanent fund dividend appropriation to $695.6 million, and provides for $1,000 per person payout.

The state Senate agreed to the dividend cap during the first special legislative session called by the governor in June, but many lawmakers in the House balked at voting on the Permanent Fund Protection Act.

Walker's $400 million reduction to oil tax credits to the statutory minimum of $30 million was met with expected derision from oil and gas industry leaders.

"This veto is shortsighted because the state is obligated to make good on its commitments," Kara Moriarty, president of the Oil and Gas Association, said in a statement.

"Today's veto tells investors Alaska is closed for business and will go back on its own policy whenever the price of oil fluctuates. For investors looking to make billion-dollar decisions, this makes an already risky investment that much riskier," she added.

But Walker defended his decision, saying, "We just didn't have the cash flow. We can't afford that, where we are today."

Walker also slashed overall education funding by 37 percent, or $58.3 million from the Department of Education budget. He also vetoed $10 million in funding to the University of Alaska.

"Not a single one of these decisions was made lightly," Walker said. "I especially struggled with the funding to education, which I have consistently prioritized. But a $4 billion deficit means nothing can be insulated."

He added, "What's disappointing is this was completely avoidable. My team and I introduced a balanced plan in December that fairly distributed the burden across all demographics. Not a single measure of that plan was passed by the Legislature, nor was another plan even introduced."

Walker's statement listed legislators' fear of taking political heat for reducing the permanent fund as a top excuse for failing to pass cornerstone recommendations in the governor's "New Sustainable Alaska Plan," released this past December ahead of the legislative session. The governor said he's willing to take the heat.

"I've taken all their excuses off the table, so I urge legislators to come back and finish Alaska's work," Walker said. "Alaskans, please ask your representatives and senators to do what is best for Alaska's future, not what is best for their own political futures."

Walker's vetoes come one week before the Legislature begins a second special session called by the governor to address fiscal bills. Lawmakers have gone into overtime twice by extending the regular session 31 days and not taking votes on major fiscal bills during the first special session, which lasted from May 23 to June 19.

The Alaska Constitution allows the Legislature to consider overriding vetoes during the special session. The second special session will begin July 11 in Juneau.

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