Legislature Approves $8 Billion FY 2007 Operating Budget, $3.6 Billion Capital Budget

State lawmakers May 9 approved an $8 billion FY 2007 operating budget and a $3.6 billion capital budget on the last day of their regular session. The capital budget includes $2.68 million for the Alaska Manufacturing Extension Partnership program, while the operating budget for the Department of Commerce, Community and Economic Development is $17.3 million. The Office of Economic Development would receive $2.7 million from the department’s budget. The department budget also includes out of separate funds $24.1 million for the Alaska Aerospace Development Corporation that includes the unexpended and unobligated balance on June 30, 2006.

The capital spending plan will pay for construction of schools, roads, docks and other projects in Alaska communities, while the operating budget pays for the administration of state government. About $700 million from the capital bill is from state revenue and the rest is mainly federal money. About $256 million for energy and schools will only materialize if the legislature passes a new oil tax system, and only if the tax has an April 2006 effective date. Lawmakers have been debating the contentious and divisive oil tax plan for three months. While the House approved the plan May 9, the Senate refused to approve it prior to adjournment.

The legislature will go into special session May 10 to amend the Stranded Gas Development Act to include terms related to oil, since it is currently limited to gas. The amendments will allow a natural gas pipeline contract currently being negotiated between Governor Frank Murkowski and three major oil producers to build a $25 billion pipeline to deliver North Slope natural gas to markets in the Midwest. The administration will offer those amendments along with details of the contract during the special session. Lawmakers have been unhappy with the governor for postponing the unveiling of details of the oil pipeline contract until the special session. It is unclear whether the legislature will re-consider oil tax system reform in the special session. (Juneau Empire/anchorage Daily News, May 10, 2006) (HMF/5/10/06)