Anchorage Chamber of Commerce Address

Thank you, Bruce Bustamante. Good day! It's a great day to be back with the chamber. It's a day when the Administration's work and the Legislature's work culminate annually in the release of the budget.

I want to recognize Lieutenant Governor Mead Treadwell; members of my cabinet -- Commissioner Susan Bell, Joe Schmidt, and Dan Sullivan. Staff members Mike Nizich, Chief of Staff; Cindy Sims, Deputy Chief of Staff; Heather Brakes, Legislative Liaison. Also, Anchorage Office Director Nancy Dahlstrom. And Karen Rehfeld, and her great team at Office of Management and Budget.

In December, I rolled out my proposed budget for you, and we went through it. I set a spending limit, and the Legislature stuck to it. It was a good working relationship in that respect! And with the 2013 fiscal year beginning July 1, I am signing the budget today.

I'll tell you more about it in a minute. But, let's be clear about one thing:

Alaska's cash position is as strong as it's ever been. We start from a position of strength.

We've been running surpluses at these high oil prices. We've been imposing ever greater spending discipline. We've worked hard to create a climate for investment across all sectors of the state.

And, we've been clear-eyed, clear-headed, and fiscally smart about the risks and liabilities our state faces.

We had several meaningful successes this winter.

They include:

* Greater educational opportunity for our young people.

This year, we completed establishing the Alaska Performance Scholarship framework. Two years ago we set the criteria for these performance scholarships. And this year, with the Legislature's help, we put a Higher Education Fund into place with $400 million in it to fund these scholarships on a sustainable basis from the interest and earnings of the account. Now, our students can work harder, and earn the reward of a performance scholarship for years to come.

* Besides greater educational opportunity, our young people are better protected. Public safety legislation that our administration sponsored strengthened Alaska's laws on sex trafficking and human trafficking.

* Also in the public safety arena, I continued to fulfill on my commitment to annually add 15 new Village Public Safety Officers in communities without any law enforcement, as well as the trooper presence to back them up.

* One hundred and twenty communities joined in Choose Respect rallies in March, as we continue to work to end the epidemic of domestic violence and sexual assault.

* And, we got to "Yes" on Point Thomson. Resolution of the Point Thomson litigation means billions more in investment dollars in Alaska. It means more Alaskans can go to work, and in three years we can see production from that field.

Going forward, we have a sound budget, thanks, in part to my executive team, our commissioners, agencies, and the legislators, staff.

That budget is defined by sound investments in:

* Infrastructure

* Education

* Public Safety

* and Energy

Our Permanent Fund ended March with a value of $41.5 billion, the highest month-end closing value in its history.

Our State rainy day fund -- our budget reserves -- they represent fully one-third of all 50 state rainy day funds put together.

That is strength. Forty-nine other states would trade places with us at this point.

Our revenues remained strong because … and you know how this sentence ends … high oil prices have masked oil production decline.

The bottom line: Our State's current cash position is solid.

We were able to turn a positive corner with the budget. It took three sessions, but this year, both the House and the Senate believed me when I said I would enforce a spending limit.

In 2010 it wasn't like that, and I ended up setting a new Alaska veto record of just over $300 million.

Last year, I set another new veto record. That time, I vetoed over $400 million. In that case, the House was working with me. In those two years, I put over $700 million back into the bank for Alaskans, so we have it when times are leaner.

This year? Real progress. Both the House and Senate agreed to a spending limit on the capital budget, and we had a more disciplined budget process. We put more into savings. And we all worked better together on the budget for Alaskans. So let's give some applause for our legislators.

Let's take a look at the larger budget components, starting with amounts in savings.

This budget saves $2 billion in direct deposits into the Statutory Budget Reserve fund and the potential of up to $3.4 billion with the projected balances in FY12 and FY13. Some other more prominent new stashes of savings include:

* $400 million to the Higher Education Fund for Performance Scholarships and AlaskaAdvantage grants.

* $1.2 billion to the Public Education Fund (forward funds K-12)

* $50 million to the Ferry Replacement Fund

* $36.6 million to the REAA School Fund

* $125 million to the new Sustainable Energy Fund to help finance future energy projects.

* Onto the capital budget. The capital budget totals: $2.9 billion, which includes $1.9 billion dollars in State general funds. Statewide, infrastructure projects comprise over $1.6 billion. It's very healthy.

* Statewide energy projects at $248 million

* Capital projects in the education arena total over $431 million -- this includes rural schools we've needed to build or restore for some time. Also, university facilities and other education facilities -- such as the State Library, Archives, and Museum Project!

* And public safety projects totaling more than $115 million for emergency response, disaster preparedness, first responder equipment and facilities statewide.

More specific to this area -- If you include the general obligation bonds voters will decide on, Anchorage and the Mat-Su have well over $780 million in projects in this budget -- including ports, roads, police and fire department upgrades, health facilities, local school projects, and park improvements.

That means there will be a healthy amount of construction work on the street out across the next five years.

Now to the Operating Budget. Growth was limited to 3.3 percent on a total funds basis. As a reminder, much of the operating budget growth is driven by statutory budget formulas.

Clearly, one of our primary focus areas this year is in the realm of Education. You could call this the "Education Session."

Early in the session, some accused us of not standing for education because we wouldn't rush headlong into increasing the formula. We demanded more accountability. I thought it more principled to require the districts to show how the money spent would benefit Alaska's children. With more accountability assurances, we added over $50 million to education.

The budget fully funds K-12 education, and forward funds it through 2014, based on the statutory formula.

We're putting:

* Nearly $6 million more into vocational education

* Nearly $20 million more into pupil transportation, to help cover increased contracts and fuel costs

* A one-time infusion, based on student enrollment, of $25 million, to cover increased energy and utility costs

* And we're increasing the early learning component by $3.9 million dollars

All of this spells relief to school district budgets and more money available for the classroom.

The total State-funded K-12 education -- formula and pupil transportation budget, FY13, is $1.2 billion.

Where do we stand as a state compared with others in funding K 12 education?

K-12 education funding is a big part of every state's budget. In Alaska, 21 percent of our budget's general fund operating dollars are spent on K-12 education and transporting students to their schools. Most states, depending on how it's measured, are around 20 percent.

And in 30 states in the Lower 48, education spending has dropped below 2008 levels. So even though costs have risen due to inflation, funding has been falling off in those states.

But here in Alaska, State funding for education is increasing -- over $50 million more.

VETOES

This year I did veto $66 million, largely from the operating budget. $50 million dollars of that was a one-time, lump-sum payment to the Judicial Retirement System that I didn't deem prudent, given financial and economic considerations.

Instead, these budgets continue to make the annualized payments on all the retirement systems to cover the unfunded liability -- as Alaska makes good on all its pension promises.

Now, you should have a handout on your tables that gives a snapshot of other priority areas for the budget. So I'd like to take some of my remaining time to discuss a couple of other issues of significance to our state.

Bringing natural gas to Alaskans and markets beyond remains a high priority for our state. Recently, we've seen a glut of natural gas in the Lower 48, and a transition away from nuclear power in Japan. This means more opportunity for Alaska's gas in the Pacific Rim than in the Lower 48.

In October of 2011, I put Alaska on a clear path to an LNG project from the North Slope to tidewater, likely at either Valdez or Nikiski.

We've made historic progress this year on getting Alaskans' gas to Alaskans -- and markets beyond.

* For the first time ever, we got the CEOs of the three major companies together to agree to move forward on resolving Point Thomson litigation and on a gasline.

* Next, we actually achieved resolution of the Point Thomson litigation, and we did so in Alaska's interest, requiring the companies to produce hydrocarbons from fields that should have been producing long ago. Point Thomson holds about 25 percent of the proven gas reserves needed to support contracts and financing. This is huge! It means billions more in North Slope investment at Point Thomson and related jobs in the next few years -- one to three years from now. It means Point Thomson-related jobs.

* Then, the three producers and TransCanada signed an MOU aligning their companies around moving forward on an all-Alaska gasline from the North Slope to tidewater in Alaska.

This historic alignment is the first time in anybody's memory that Alaska's three major leaseholders-producers working with an independent pipeline company were aligned. That's a first in our state. It's unprecedented! And TransCanada got its project plan amendment approved by the State, so they can move forward on the all-Alaska private sector gasline.

As for Alaska's oil tax regime, we clearly have more work to do there.

After two years and thousands of hours of legislative work; thousands of pages of information and analysis; and many Alaskans testifying in support of comprehensive change to Alaska's oil tax regime, we simply could not get 11 votes in the Senate for comprehensive tax change. They were stuck at 10-10.

We will continue to press the case for a competitive tax regime that brings more investment back to the state at these higher oil prices.

In closing, I understand this year marks the 97th year of the Anchorage Chamber of Commerce. That means your 100th anniversary is right around the corner. I'm sure you're starting to talk about a centennial celebration.

The Anchorage Chamber was here when this community was but a tent city along Ship Creek. Anchorage had a population of 2,500 in 1915 -- but already had a vibrant Chamber of Commerce!

I think of people like the late Frank Reed, who came as a babe-in-arms to Ship Creek in 1915, and grew up to serve as the president of this very Chamber of Commerce. Who helped start United Way, and who chaired the consolidation committee that led to the creation of the Municipality of Anchorage. And so much more before he died in January of this year.

People like Frank were pioneers, business leaders, and visionaries.

…As are you. So what kind of community do YOU envision this will be as you approach your centennial? What kind of state?

I envision that Yes, our State natural resources will be developed for the benefit of all Alaskans. Yes, our children will be better educated. Our families will be safe and have more opportunities. Yes, we will have more affordable energy and plentiful jobs.

With you, we are saying Yes to a stronger economy and stronger families.

Yes to Alaska's strong future. Thank you, very much!

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