The Capitol Report June 2015
By Chris Christensen
Associate Vice President for State Relations

It has been 143 days since the 29th Alaska State Legislature gaveled in on January 20. After a 98-day regular session and two special sessions, the legislature is getting ready to adjourn after reaching an agreement on the FY16 operating budget.

The agreement obtained the three-quarters vote needed to access the Constitutional Budget Reserve (CBR). The CBR is the savings account that will be used to cover the estimated $3.2 billion deficit that the state will have in FY16. Prior to this agreement, the Senate was able to achieve a three-quarters vote but the House was not; the House minority refused to provide the necessary votes unless additional funding for certain items was added to the operating budget and the pay raises in the collective bargaining agreements were approved.

The operating budget that finally passed the legislature reduced UA’s budget from the FY15 level by $26.4 million. This cut is $5 million smaller than the $31.4 million cut that was on the table when the regular session ended on April 27 . One of the demands of the House Minority was that UA’s cut be reduced by $5 million, and this demand became part of the final compromise.

The final operating budget also approved the collective bargaining agreements negotiated by UA and by the state, and it provided funding for pay raises for union and non-represented employees. However, after providing additional money for the raises, the budget gave the executive branch (including the university) an unallocated cut in an amount equal to the amount of the raises. Basically, this means that no additional funds were provided to cover pay raises.

The cost of raises for UA’s union employees is approximately $8 million. The cost of raises for non-represented employees is approximately $12 million.

The following intent language for the pay raises was added to the budget:

It is the intent of the legislature that the following appropriations be one-time increments to the operating budget. It is the intent of the legislature that there be no cost-of-living pay raises beginning with collective bargaining agreements negotiated in 2015.

It is the intent of the legislature that language in each of the negotiated collective bargaining agreements allow for the agreements to be re-opened if the oil price of Alaska North Slope West Coast reaches $95.00 and if that price is maintained or increases over that amount for a period of 60 consecutive days; this language shall be reviewed at the end of the
three-year negotiated agreements.

It is the intent of the legislature that language in each of the negotiated collective bargaining agreements allow for the agreements to be re-opened if the oil price of Alaska North Slope West Coast falls below $45.00 and remains below that amount for a period of 60 consecutive days; this language shall be reviewed at the end of the three-year negotiated
agreements.

There was also intent language relating to the unallocated reduction that was equal to the amount added for the pay raises:

It is the intent of the legislature that the unallocated reduction be implemented in a manner that results in a minimum number of state employee layoffs and that is geared toward finding internal agency and department efficiencies. It is the intent of the legislature that no supplemental funding be requested during the next regular session to fill the unallocated reduction.

You can find more information on the compromise budget bill (HB 2001) that was just passed here:
http://www.akleg.gov/basis/Bill/Detail/29?Root=HB2001#tab6_4

The budget will now go to Governor Walker for signature or veto. The assumption is that he will sign it into law. With the passage of a fully-funded operating budget, there should be no additional special sessions on the budget this year.