New Sustainable Alaska Plan

FY2017 Budget Overview

December 14, 2015

Office of Management and Budget

1

Alaska’s Fiscal Challenge

2 2

Federal Funds $3.3 billion (27%)

Permanent Fund Inflation Proofing

& Dividends $2.3 billion (19%)

Designated General Funds and Other State Funds

$1.5 billion (13%)

Unrestricted General Fund Gap $3.4 billion (28%)

Unrestricted General Funds

$1.6 billion (13%)

Doing Nothing is Irresponsible

3 3

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2025

Dividends End

2020

Other UGF Revenue

CBR Balance is

Depleted

CBR

Draw

Oil and Gas

Production Tax

Earnings

Reserve

Draw

Draw from

Permanent

Fund Corpus?

Conversations with Alaskans

4

The Alaska State Legislature Alaska State Chamber of Commerce Juneau Chamber of Commerce Fairbanks Chamber of Commerce Anchorage Chamber of Commerce Kenai/Soldotna Chamber of Commerce Ketchikan Chamber of Commerce Sitka Chamber of Commerce Juneau Rotary Clubs Fairbanks Rotary Clubs Anchorage Rotary Clubs Mat-Su Community Town Hall Homer Community Town Hall Ninilchik Community Town Hall Juneau Community Town Hall Dillingham Community Town Hall Wrangell Community Town Hall Fairbanks Economic Development Rasmuson Foundation Foraker Group Forums Island Institute

Commonwealth North Alaska Conference of Mayors Alaska Municipal League Alaska Commission on Aging Alaska Common Ground Pioneers of Alaska Southeast Conference Association of Alaska School Boards Alaska Association of School Business Officials Alaska Principals’ Conference Alaska Council of School Administration Alaska Oil and Gas Association United Fishermen of Alaska Institute of the North Alaska Federation of Natives League of Women Voters Odom Corporation K&L Distributors ConocoPhillips Alaska Municipal Managers Association Anchorage Board of Realtors Alaska CHARR

More than 50 events held since June with many more scheduled

Comprehensive Plan

5

Elements for long term balanced and sustainable

budget

1. Sustainably Utilize the Earnings Reserve

2. Provide Dividends at 50% of Royalty

3. Reduced Spending

4. Broad Based Taxes

5. Priority Investments

Comprehensive Plan: Sustainable and Balanced by FY19

6

Gap $3,400 Alaska Permanent Fund Protection Act (annual draw) $3,200 Less oil and gas revenue diverted from the general fund ($ 950) Net $2,250 New Revenue Components (estimated amounts) Earnings on Savings $ 135 Mining $ 12 Fishing $ 20 Tourism $ 15 Motor Fuel $ 45 Alcohol $ 40 Tobacco $ 27 Oil and Gas $ 100 Individual Alaskans (Income Tax) $ 200 Spending Reductions (estimated amounts) Continue Cuts (through FY19) $ 200 Reform O&G Tax Credits $ 400 Net Priority Investments* ($ 44)

Total $3,400

*Priorities such as the gasline project require planned revenue as well as further spending cuts for a balance budget.

Dollars in millions

Comprehensive Plan: Sustainable and Balanced by FY19

7

New Sustainable Alaska Plan Components

Dollars in millions

• Multi-year approach

• All agencies and programs involved

• Service reductions and closures

• Reduced grants and subsidies

• Efficiency initiatives

Spending Reductions

8

Workforce • 600 fewer state employees compared to last year • 150 additional staff reductions est. in FY17 • By FY19 there will be 900 fewer employees than FY15 • Hold personnel costs Agency Operating Budgets • $400M cut in FY16 • $139M cut in FY17

Education, UA, AVTEC reduced by $25M (1.5%) Health, Life Safety, and Justice reduced $64M (3.6%) Other agencies reduced $50M (8.5%)

Spending Reductions

9

FY17 Overview Unrestricted General Fund Budget by Category

Formula Programs 42% $2,018 million

Agency Nonformula 41% $1,980 million

Capital Budget 4% $195 million Statewide Appropriations 12% $561 million

Other formula 3%

Medicaid 13%

K-12 26%

10

I assume the $1.2B tax credit is included in statewide appropriations.

* Statewide Appropriations does not include $1,200 million for oil and gas tax credits

11

$-

$1,000.0

$2,000.0

$3,000.0

$4,000.0

$5,000.0

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017

Formula Programs below FY13 level

Non Formula Programs below FY12 level

FY17 Overview Unrestricted General Fund Agency Operating Budget Trend

12

Priority Area All Funds State General Fund

Federal Match/Leverage $1,079,188.9 $82,860.0

Energy and Energy $52,930.0 $21,280.0

Maintenance $92,076.2 $53,001.2

Legal Obligations $11,012.4 $10,457.6

Initiatives and School Replacement $27,811.3 $27,691.3

TOTAL $1,263,018.8 $195,290.1

Dollars in thousands

FY17 Overview Capital Budget

13

Budget

Agency Reductions -$544M Since FY15 -$140M this year

Gasline Support $38M investment Additional for FEED

Oil & Gas Tax Credits Reform Legislation $73M included $1.2B transition pending

Medicaid State Savings $106M $62.3M FY16, $43.7 FY17

K-12 Support Funded at BSA FY17 Level Reduced grant funding

Federal Funds -$300M for acct changes

FY17 Overview Budget Highlights

New Sustainable Alaska Plan

14

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

New Revenue

Past Deficits

New Sustainable Alaska Plan

Existing Revenue

For more information on the budget

Pat Pitney, Director Office of Management and Budget 907-465-4660 Email: Pat.Pitney@alaska.gov

15