Governor's Press Release (Fema + S&P AAA Bond Rating Report) - P.O.W. Report

Tuesday, November 3, 2015

Governor's Press Release (Fema + S&P AAA Bond Rating Report)

No. 15-143

Contact: Jeremy Zidek, Division of Homeland Security & Emergency Management – (907) 441-2337

Governor Walker Accepts FEMA Support for North Slope Borough Coastal Erosion

November 2, 2015 JUNEAU – Governor Bill Walker announced today he has accepted financial support from the Federal Emergency Management Agency (FEMA) Public Assistance Program to address damage caused by an August storm in the North Slope Borough. The Governor’s office was notified late last week that the agency had accepted the state’s request for disaster assistance and issued a presidential proclamation to activate restoration funds.

“The North Slope Borough did an outstanding job protecting their roads and infrastructure as best they could during the August storm. Without their brave efforts, the damages would have been significantly greater,” said Governor Walker. “The State of Alaska has an effective relationship with FEMA, and with their support, we will be able to repair the damage caused by this storm”

Beginning the week of August 27, strong Arctic coastal sea storms along the Northern Arctic Coast produced high waves and washed out seven miles of borough roads. The most significant damage happened in the community of Barrow, and some minor damage was also reported in the village of Wainwright. Governor Walker traveled to Barrow on September 9 to observe damages caused by the storm..

On October 14, Governor Walker signed a Disaster Declaration in order to activate State of Alaska Public Assistance funds and request additional federal support for the recovery efforts. The preliminary damage assessment conducted by the state and FEMA identified $4.6 million in damages to roads and infrastructure, and the two agencies will now share the cost of those repairs on a 25%/75% basis.

The Alaska Division of Homeland Security and Emergency Management will work with the North Slope Borough and FEMA to oversee the recovery efforts and ensure all documentation requirements are met.

Governor Responds to S&P on Alaska's Bond Rating

“I am pleased in the positive feedback provided by Standard & Poor’s and the credit rating agency’s acknowledgement of our proactive approach to begin closing the state’s $3.5 billion budget deficit. It is critical to preserve our AAA bond rating to ensure the state can maximize its return on investments, especially as we diligently work to develop a gasline project. During these tough fiscal times, we must all pull together. I agree with Standard & Poor’s that time is of the essence, and we must act soon to preserve our quality of life for future generations.” -Governor Bill Walker

S&P Alaska Report
SAN FRANCISCO (Standard & Poor's) Nov. 2, 2015--On Oct. 26, 2015, Alaska's Attorney General, Craig Richards, released a report titled, "A Sound Fiscal Future." In Standard & Poor's Ratings Services' view, publication of the report itself is a favorable development because it illustrates to state lawmakers how a pathway to a more sustainable fiscal structure for Alaska's general fund is possible. Our recent outlooks have noted that Alaska will need to find some way to address its fiscal imbalance if it is to prevent its credit quality from slipping. The Financial Opportunities Working Group, which was formulated by Governor Bill Walker and produced the report, has outlined an approach with several policy options for lawmakers to consider. From a credit perspective, more important than any particular policy detail it contains is that the report's main proposals would help bring the state closer to structural fiscal alignment.
As we see it, a move such as the one the attorney general's report proposes constitutes the type of significant fiscal reform that will be necessary to avert a downgrade. The report's main proposal entails fundamentally redefining the source of revenue for the state's general fund. Most significantly, the state would transition away from relying on oil-related royalty and severance taxes to finance its general fund expenditures. Instead, the state would manage all of its assets, including those in the $46 billion permanent fund, as a sovereign wealth fund. Under this model, Alaska would deposit all or most oil-related revenue to the permanent fund and then make a consistent draw from the permanent fund to pay for general fund expenses. This approach has the benefit of shifting the effects of oil price volatility to the permanent fund, away from the general fund.
However, adopting the sovereign wealth model—despite being nothing short of a complete overhaul of the state's finances—would not immediately solve the state's fiscal problem. The report estimates that it would require total assets of $100 billion to sustainably fund state expenditures and to pay dividends to state residents at their current levels. Presently, however, total state assets sum to roughly $56 billion (includes the permanent fund, permanent fund earnings reserve, and a portion of the state's constitutional budget reserve). Therefore, the current level of assets can support an annual draw of $3.4 billion while maintaining its value in real terms. And once accounting for the $1.4 billion estimated cost of funding dividend payments to state residents, revenues available for the general fund would only be $2.0 billion. Based on fiscal 2016 general fund expenditures of $5.2 billion, this leaves a large, $3.2 billion structural deficit, similar to the existing deficit in the enacted budget. Read the rest here.

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