Governor Frank Murkowski
'06 Budget Unveiling

GOV. FRANK MURKOWSKI: Thank you very much. Merry Christmas, a happy holiday season to all. And I trust that -- I think everybody's entitled to a commercial. Do we have any of those ornaments with us? No. How could we miss the opportunity?

As you know, the residence was built in 1912. And when Governor Hickel was down there, why he made substantial improvements, Governor Sheffield. But the last time we opened the windows, why, the window sills kind of came apart, and so Nancy developed a little foundation. And for the first year they're selling Christmas ornaments and I'll bet you before I'm through we can get one over here, can't we, Linda?

UNIDENTIFIED VOICE: Yep, we can.

GOV. MURKOWSKI: So for those among you who simply haven't address the responsibility associated with Christmas presents for $20 you can get this beautiful ornament. It's an original of the residence which is your residence in Juneau, Alaska. So we'll have that over for the benediction.

UNIDENTIFIED VOICE: They'll be available today at the open house at 4:30.

GOV. MURKOWSKI: And they'll be available at the open house at 4:30 and they'll be available here after I'm through. (Applause)

Nancy's not here. She's coming on the airplane in a little while.

Okay. Well, anyway, let me acknowledge the head table and let me acknowledge the role of Commonwealth North and the rather historic reference to our budget preview being in front of this extraordinary group of Alaskans that has accomplished so much to advance all aspects of quality of life in Alaska.

You know, nearly 20 years ago there was a bumper sticker that started showing up on some of the vehicles in Alaska and it said something like this; God, please give us another boom. We promise not to fritter away or words to that effect, okay, so that sets the theme for my budget address today because the windfall that we expect in FY '05 isn't exactly another boom, but it affords us a unique opportunity that we cannot and must not fritter away. It's really an opportunity to invest in some of our highest priorities and still achieve a balanced budget for 2006. Come on, now, come on. (Applause)

Now, I'm delighted to be here today with Commonwealth North to roll out the state's fiscal 2006 budget. And as you know, the budget must be delivered today to the Legislature, so it is for those legislators who are here as well as those who will be served -- I don't mean served, I mean a copy will be sent to them in the immediate hours while the day is still in so we're going to meet our criteria of the Legislature being informed.

Now, I want to use this opportunity to challenge, if you will, Commonwealth North and the North Forum and, Ira, you and the Alaska Humanities Forum to propose this Alaska history curriculum to the Board of Education. It's already been noted, but young people really need to understand the Alaska Statehood. They really need to understand the Alaska Native Claims Settlement Act. And they really need to understand the Alaska National Interest Land Conservation Act and how our history is affected by it. And we need to get out, I think, a very practical curriculum that really shows the intensity of the commitment of those senior Alaskans who were involved at that time to pass on history and culture.

And, Governor Hickel and Ira, we have that in our budget. Now I'm reluctant to tell you how much because I want to see just what you can do on the basis of, you know, you'll first submit a draft and then we'll put it out for bid, is that fair enough? But I think these two gentlemen and Commonwealth North and the Alaska Humanities and the Northern Forum really have a major role to play and a real challenge, so I just wanted to highlight that.

Another matter that was addressed during the introduction was the Asset plan, which you have communicated to us, Nelson. We are reviewing that. I think there's some excellent suggestions because we clearly need to have a clear and concise procedure in the manner in which we address our natural resources in this state.

Now because the budget reflects values I'm proposing to the Legislature that we use some of the windfall to not only balance the FY '06 budget, but also to advance some of the goals that Alaskans elected us to accomplish. I know there's many interpretations here, but growing the economy is one of the major commitment of my administration. To assist the private sector to create good jobs here at home because we're losing too many of our young people. And we're going to do this through resource development. It's the timber, it's the oil and gas, it's the minerals, it's the tourism, it's the fishing. It's the access to jobs.

Now Alaskans have to be made comfortable in their surroundings so we have to assure that Alaskans are safe in their communities. We have to promote families that are healthy and have a good quality of life. There's no reason in the world in this state today that we should have anything but the highest quality of life. So my mission for Alaska is that by developing our resources and providing good jobs for Alaskans and using the resulting state funds to improve education, strengthen communities, strengthen families, and provide infrastructure we can enhance the opportunity for a good quality of life for all of our citizens. And these are the values that are reflected in this budget.

Now, this is the Christmas season and I'm doing it little different, I'm borrowing from Dickens, if you will, and I'm not going to identify those that helped me write it because this is an effort to put you in the spirit of Christmas.

So in any event being the Christmas season I hope that I can borrow from Charles Dickens' Christmas carol. And have the ghosts of budget past, present, and budget future to describe to you where we have been on the budget, where we are now, and where we're going in the future. And I think Dickens paraphrased so-called Christmas budget metaphor expresses my hope to you that this budget will be kind of a vital plank, if you will, in the bridge that will get us from today to a brighter tomorrow in a fiscally responsible way.

The ghost of budget past would tell you the budget has been balanced only three times in the last 12 years. That's right, only three times. The ghost of budget past will tell you that the preceding administration had drawn more than $5 million, of course with the help of the Legislature, $5 million from the constitutional budget reserve. Our savings account was down to 1.9 billion. Today that budget reserve is 2.1 billion, up 200 million. Any reaction? (Applause)

Hard to get this crowd warmed up. Anyway, the ghost of budget past will tell you the budget that this administration was handed when we came to our office in December of 2002 would have been roughly $800 million short. Within an hour after being sworn in I signed two administrative orders which required a careful review department by department of all the programs to see where efficiencies and savings could be found. Too often it seemed that government programs are often judged solely on how much money they spend. Well, we shifted that focus to what results are delivered per dollar spent. And we're reporting that performance to Alaskans so you can hold us accountable for effective delivery of services.

At that time I was also concerned that based on revenue projections and a continued level of state spending our savings account was projected to run out in three years. Some of you will remember that. Instead it has grown to 2.1 billion.

Well, at that time directed OMB director, Cheryl Frasca, to limit the draw from the constitutional budget reserve for FY '04 and succeeding budgets to no more than 400 million a year. In other words, we couldn't dip into that savings account to pick up the deficit for more than 400 million. The idea was to make our savings last until revenues from resource development kicked in. Well, I reduced the FY '04 budget by 138 million below what the Legislature had authorized.

Well, I was there the Scrooge. At that point I was the one that more or less fouled up (ph) the Christmas season, but I'm not going to dwell on that today. But the fact is at that time Santa Claus hadn't come along and given us $50 oil. And so I had to make some tough decisions and I think it would have been irresponsible of our administration to do anything else at that time, so we cut. Those decisions weighed on me and they still do, but nevertheless, I'm committed and it was the right thing to do. It's what you would do in your own family if your revenue was declining.

Finally, the ghost of budgets past would describe for you the monumental effort that we made in the last legislative session to address what I view as a short-term structural budget gap between now and the time we get a gas line into service and ANWR which is estimated around 2012. But even though we did not get a resolution last year we need to continue to be very positive and invest in our priorities and invest in Alaska's future. So I'm going to be working with the Legislature and organizations throughout Alaska in the coming session to see if we can find an acceptable solution to bridging this time frame. And we're going to need the continued help of Commonwealth North in this effort.

And I want to challenge President Hamilton and our University system to come up with some proposed solutions that are workable and acceptable. We made an effort last year. We need to continue to focus on it. It'd be a great opportunity to see what some of the business classes at our university could come up with some suggested alternatives. But enough with the ghost of budget past.

Now to the ghost of the present budget. And that ghost will tell you a little bit about the soaring oil prices that Santa Claus delivered in the year 2005. As a consequence not only are we spared from withdrawing the 360 million from the budget reserve as we had anticipated last year, but we were given a windfall of $650 million. (Applause)

Now the ghost of budget present will tell you that Scrooge in this last scenario, and there is one, and that's the volatility of the oil price. Prices have dropped about $17 per barrel in the last 60 days and even with anticipated NPRA and West Sac production we now expect 15,000 fewer barrels per day through FY 2013 than we have seen up through -- well, 2005 or thereabouts. On the other hand, there's a bright spot in the heavy oil production which is increasing as the technology improves.

Now this decline may seem insignificant but it's going to cost the state millions of dollars each year if production does decline. The good news is we have the capacity for more production and, of course, the bottom line is go out and find it and fill up that pipeline.

Moreover, because of the impact of the economic limit factor or ELF there will be a significant reduction in production taxes paid to the state government going forward. This makes it more incumbent upon us to achieve our goals of an in-service date for the gas line at least in the time frame of around 2012. Stability in oil production taxes under ELF, increased oil and gas exploration and increased production going forward, hopefully from ANWR. Now I'll be urging legislative leaders to hold hearings on ELF. We discussed that in the last session. I will present my plans on this and other revenues during the coming session.

So how is the ghost of budget present advised this administration to invest this year's windfall. Well, we were following our principles in setting these priorities. For openers, we'll save 291 million from this year's windfall and we'll use that in order to balance next year's budget. Second, you will see that our proposed spending for FY '06 is less, it's less than both the constitutional spending limit which was proposed in the Senate and the constitutional spending limit which passed the House, so we think we're in line with the legislative dictate. Third, accept more expenditures for K through 12 education, the University system and seniors. What we propose are one time investments. They're not reoccurring. In short, we've got a responsible budget and a plan that doesn't fritter away this windfall.

As you might expect the dollars we were proposing to invest reflect our priorities, the priorities of natural resource development, jobs for Alaskans, families that are healthy, and communities that are safe.

I see tremendous opportunities in the coming year to make substantial gains in both the gas line and in opening up ANWR. That is why our budget package will include a substantial request for funding for the necessary efforts to get the stranded gas contracts before the Legislature this year so we can meet our in-service goal of a gas line by 2012. This is the administration's highest priority, make no mistake about it.

Now as I'm sure you've heard, we are recommending that the state take an equity share in the gas line and assume some of the shippers' risk. We're going to be examining this. The Legislature is going to be addressing it. We hope to have it on our package before the Legislature. The bottom line with that approach is the Legislature can't amend it, they can only vote it up or down.

We see great financial benefit for Alaska being a partner, being at the table and in our negotiations we've got significant negotiations going on today with two groups and this prerequisite is included in both those discussions. By achieving a 2012 in-service date we narrow the period in which the state is subject to the structural budget gaps which we attempted to resolve last year.

Now 10 days ago as some of you know I did lay out a transportation plan to accelerate oil and gas development that among other things called for an access road on the North Slope to be built in the area of Point Thompson. Not only would this provide access towards ANWR, it would provide a pipeline corridor and road access to gas at Point Thompson which will assist us in the construction of the gas line. And yesterday, yesterday I proposed a transportation package that will fund local projects that will improve, deliver safety, and enhance the movement of goods throughout the state and the metropolitan area. It will also access our resources and provide access to key tourism destinations. We've got to expand our venues in this state.

For Anchorage the package, of course, includes fixing the bottleneck of the Glenn Highway, at Bragaw, finally addressing the east/west flow of traffic along the Tudor Road by improvements at the Bragaw intersection as well as extension of the Dowling Road. Highway projects for Fairbanks are included. Our FY '06 budget also includes funds for timber, mining, fishing and tourism development which are in the handouts on the table which you have before you and Cheryl will be happy to go over them.

This budget proposes funding to promote healthy, healthy Alaska families by providing the hope of a good job for future Alaskans and their children. Now last month I rolled out a proposal which not only provides additional funding for Alaska's K through 12 system, but makes that financial commitment up front, up front, for a two year funding commitment. I think this is responsible and this will provide fiscal stability which will enable school districts to plan how to best meet their needs and the learning needs of students and provide the assurance that teachers are not going to be distracted like we've seen in the past where they're threatened with lay-offs not knowing what the budget certainties or uncertainties are.

Now this makes the third year in which education funding will have increased under this administration. This increase in education funding from 680 million two years ago to 888 million would be the largest increase in education funding in this state ever. (Applause)

Back to the ghost. The ghost of budget present advised me to propose a plan to help offset prescription drugs to Alaska seniors. So starting in January 2006 federal Medicare will provide an insurance plan by which seniors can obtain prescription drugs. But on Monday I announced a plan by which we would pay both the premiums and the deductibility for that insurance for every senior in Alaska with an annual income of just under $35,000. And this, ladies and gentlemen, will cover about 40 percent of Alaskan seniors. (Applause)

In addition, we're extending to our seniors a senior care plan which will provide $120 a month to nearly 7,000 needy Alaska seniors who earn less than $15,700 per year.

One other area I feel strongly about and it's not in the budget, but I hope to be able to put it in. We are examining a health care insurance plan to cover our most vulnerable, our children, who are uninsured under the age of 18, so you're going to be hearing more on this, but I feel very strongly about it. (Applause)

The ghost of budget present would also tell you that we're helping our Alaska communities, helping them meet their obligations. We proposed to provide local governments approximately $37 1/2 million to pay for the two years of increased retirement system costs, the PERS and TERS. This gives them a window in which to develop their own strategy on how to best meet their local obligations. This retirement assistance is needed, I'm telling you very frankly, because of the failure of past administrations and past Legislatures to adequately fund the retirement costs. It was evident that prices were going up. They didn't increase the funding contribution, in some cases they decreased it. And I think that's irresponsible.

We also proposed one time financial assistance to small cities to help with their high cost of fuel and energy. These are communities that are dependent upon diesel power generation, mostly in rural Alaska. We know that high energy costs are a barrier to economic development in the very place in which jobs are most needed and that's our rural areas.

We want all Alaskans, of course, to be safe in their communities. And with the support of the Legislature we've added approximately 20 troopers since we initiated this process of reviewing the needs of rural and urban Alaska. I'm very, very proud of our troopers. They put their life on the line every day to protect Alaskans. Some of us take it for granted. (Applause) Now we're needing nine more troopers and I'm proposing that in the FY '06.

I also want to expand the work of our excellent crime lab here in Anchorage that has greatly contributed to our ability to solve crimes increasing -- well, we've been able to pull many cold cases back and prosecute.

In addition, we simply have to deal with substance abuse in this state. Let me tell you, I can't begin to -- the degree of frustration of what we've spent for substance abuse. The troopers are doing a fine job, but do you know that nearly one-half the calls that our troopers get are alcohol related? And Mayor Begich yesterday indicated that the Anchorage Police force, 75 percent of the calls they get are alcohol related. We're going to have to address that, ladies and gentlemen, that's simply too high. And if we could spend half of what we spend on rehabilitation for education we'd make a tremendous advancement in the quality of education in the state. It's easy to ignore, but it is a big social problem and we are out of line with the rest of the states and we ought to face up to it. Okay? (Applause)

Now the future, what's the ghost of the future, well, the budgeting job will be much easier of course if we the gas line in service around 2011, 2012. If the Legislature agrees to the concept of equity ownership and accepting some of the shippers' risk there'll be a tremendous financial return to the state which we can use to maintain essential public services.

Between now and then we must be diligent in holding the line on government growth, spending. We have to form our priorities, education, public safety, resource development, job opportunities in the private sector. Improving results and reducing the cost of government as a way to manage our savings just like a family would manage its budget until resources from the gas line and ANWR are available.

Our Permanent Fund when I looked at the last time was $29.6 billion. Last year we were talking 27. I'm told that it get be 30 depending on what the market does.

Do you have those ornaments in that bag?

UNIDENTIFIED VOICE: Unh-unh.

GOV. MURKOWSKI: Talking about monies, okay. Well, in conclusion, ladies and gentlemen, Alaska has a tremendous future and one filled with extraordinary economic opportunities for our citizens, careers for our children, healthy families, safer communities. We've got to maintain the diligence, the discipline and the courage to responsibly recognize through technology we can develop our resources safely. We can maintain appropriate budget discipline to spend on the things that are most important. We think this budget represents that effort. So to end on this appropriate note as Tiny Tim might have said God bless us everyone and God bless Alaska. Thank you. (Applause)

First question. This is just what it looks like. Solid gold. $20. And if you're looking at something to take home and put on your Christmas tree charity begins at home.