Monday, April 21, 2014

#AKbudget| The morning after the "final" day ... which wasn't

As readers will know from other sources, the Alaska legislature has gone into overtime after being unable to complete action on all the bills (it wants to take up) within the 90 days it otherwise sets aside for these things.

While I had intended this morning to make a semi-final (for me) calculation of the damage done to the state's fiscal picture by this session (and it is substantial), three of the bills that remain outstanding will have a significant effect on that -- the capital budget (which is currently in the House), the omnibus education bill (which is in the Senate) and the refinery tax credit legislation introduced at the end of the session by the Administration (and is now back over in the House after being amended by the Senate).  As a result, final (or even semi-final) calculations must wait.

That said, shortly ago Legislative Finance posted a summary of the House Finance Committee's final version of the capital budget.  Presumably it will go to the floor later today and, barring unforeseen circumstances, be adopted by the House and then sent to the Senate for subsequent action.

This version provides for $19 million more in spending than the version previously provided by the Co-Chair.  I have not attempted to isolate where the increases are; presumably those will be explained when the version is discussed on the House floor.

I also have taken the time this morning to reflect further on how to incorporate the refinery tax credit legislation into the budget model.  As explained in the Fiscal Note accompanying the bill, the credit first operates as an offset against corporate income taxes otherwise due the state, which would reduce revenue, but in the event the credit exceeds that amount, the refiner then also can request that any remaining credits "be refunded by the state."

Each refinery is able to claim up to $10 million in credits per year; there are four refineries (including Flint Hills, which also is entitled to the credit if it reopens under either its current or a future owner) in the state.  As the Fiscal Note explains, it is unlikely that all refineries would qualify for all of the credits each year.

As a placeholder, I have assumed half ($20 million) in the available credits will be taken in FY 2015.  Because it operates the same for budget purposes, I have simply included that amount as a separate line item in the calculation rather than allocate it between revenue reduction and claimed refund.

As did yesterday's version, this version also assumes the education bill is finally resolved at the overall cost (if not in the same manner) as the version that emerged from Senate Finance.  That cost is estimated at $110 million.

As noted below, the effect of these changes is to increase the anticipated FY 2015 deficit to $1.7 billion.

Except as noted above, the sources for this analysis remain the same as used for yesterday's.  We will update further as the pictures for the final education, capital and if changed, the refinery tax credit become clearer.