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| Al Grillo / The Associated Press |
 Budget planning: Lt. Gov. Sean Parnell, right, with Gov. Sarah Palin, answers a question Friday as Palin unveils the state budget during a news conference in Anchorage. |
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Gov. Sarah Palin on Friday proposed cutting $150 million from the $3.65 billion preliminary budget proposed by former Gov. Frank Murkowski.
The cuts were necessary, Palin said, for the state to live within its means.
Palin said her budgeting philosophy, including a desire to save surpluses for the future, came from recognizing that the resources filling state coffers were nonrenewable.
"When that oil is gone, it's gone," she said.
Palin proposed allocating $1.8 billion in to the Constitutional Budget Reserve and $1.3 billion into the Permanent Fund
The state also needs to build up a surplus so it can continue to provide essential services even if oil prices drop, she said.
"The volatility of oil prices can easily turn a surplus into a deficit," she said.
Palin said the budget fully funds education under the education foundation formula, plus an additional $200 million to cover increased retirement costs.
Palin and Lt. Gov. Sean Parnell, who has been overseeing development of the budget, did not specify where they would cut the $150 million.
Finding that much fat to trim from the general fund would be "a difficult challenge," Palin said.
But she called it a necessary step to keep control of government spending and government growth.
She and the lieutenant governor plan to work with the Legislature on developing the cuts. Palin encouraged state employees - "those in the front lines" - to suggest places were cuts could be made.
Palin also proposed some new spending and some tax cuts, which would increase the economies necessary to meet her goal of a $3.5 billion budget.
The budget includes money for the state's longevity bonus, a program on its way to being phased out when it was eliminated prematurely during the Murkowski administration.
Palin said restoring the longevity bonus would cost $33.7 million, and provide needed money to more than 12,000 seniors. The state made a promise to those seniors when it began the phase-out plan, and Palin said she would keep it.
"It was a broken promise that needs to be fulfilled," she said.
Palin's budget also contains a $77 million contribution to help local governments meet rising Public Employee Retirement System and Teacher Retirement System costs.
She warned that the state couldn't necessarily afford that in the future.
"That may not be able to be a recurring contribution," she said.
Palin said all affected parties needed to cooperate in developing a long-term plan to deal with the $8.2 billion retirement shortfall.
Among the tax cuts is a proposal to eliminate the state's studded-tire tax, which she called "charging a premium on safety" that raised only $1.8 million for roads while increasing administrative costs.
She also said she'd roll back a recent increase in the state's business tax, which quadrupled business license taxes. Cutting that tax back to its previous level will cost the state $4.6 million, she said.
"A tax to Alaskans who start a business sends the wrong message," she said.
Some revenue sharing with communities will continue.
Palin reiterated plans to separate wildlife enforcement officers from Alaska State Troopers. The cost of that split has not yet been determined, but it will include new wildlife officers.
Important decisions yet to be made include expensive capital projects such as roads and bridges. The controversial Gravina Island "Bridge to Nowhere" in Ketchikan, as planned, would consume the entire highway budget, she said. There, as well, Palin plans to work with the Alaska Legislature to prioritize projects.
That project, the Lynn Canal Highway and the Knik Arm Bridge in Anchorage will all have to be justified, she said.
• Pat Forgey can be reached at patrick.forgey@juneauempire.com.
