Alaska lawmakers are considering whether to ask voters for permission to borrow money for major upgrades to the state’s electrical grids, they said this week.
Last year, the U.S. Department of Energy awarded the Alaska Energy Authority a $206 million grant to upgrade electrical transmission lines in Southcentral Alaska. That grant must be matched by state dollars, and on Thursday, AEA’s board voted to spend $20 million in borrowed money on part of the match.
That still leaves the state on the hook for more than $180 million. One possible solution is what’s known as a statewide general-obligation bond, which would have to be approved by voters in a statewide vote this fall. When a government issues a general-obligation bond, it pledges to use all available revenue to pay off the bond. Voters haven’t been confronted with a borrowing issue since 2012.
“I’m a big fan of that idea of a GO bond,” said Senate Majority Leader Cathy Giessel, R-Anchorage. “I think it’s time to invest in the state. And this transmission grid is critical to our future. So I’m a fan.”
A bond might not be limited to electrical infrastructure. Gov. Mike Dunleavy’s annual budget proposal has a relatively small capital budget, which pays for construction and renovation projects.
Rep. DeLena Johnson, R-Palmer and co-chair of the House Finance Committee, said it’s hard to see a substantial capital budget without a bond.
We’re looking at any and all tools that may be available to us to put Alaska on an energy track that’s going to be reliable, secure — that’s hopefully as cheap as possible for customers.
– Gov. Mike Dunleavy, R-Alaska
No borrowing proposal has officially been introduced to the state Capitol, but the idea is circulating within the building.
“We’re running scenarios, but there’s no commitment to a GO bond,” said Gov. Mike Dunleavy.
“We’re looking at any and all tools that may be available to us to put Alaska on an energy track that’s going to be reliable, secure — that’s hopefully as cheap as possible for customers,” he said.
Dunleavy said work on those scenarios will be done “hopefully soon,” in time for legislators to consider the issue this spring if his administration decides to ask for a bond.
This week, members of the House and Senate finance committees were presented with a status report on the state’s debt load.
Historically, the state’s policy has been to keep its ratio of general-obligation debt service to unrestricted revenue — a key measure of the state’s capacity to assume debt — below 5%. As of June 30, it was 1%, the lowest point in 10 years. The ratio peaked above 6% in 2017.
Ryan Williams, the state’s debt manager, said the state is planning a “fairly aggressive pay down” of remaining debt over the next 15 years.
The biggest obstacle to a bond issue may be on the political front. Putting a bond in front of voters first requires approval by the Alaska Legislature.
AEA’s planned electrical grid upgrades will principally benefit southcentral Alaska, and legislators from other parts of the state have said that they would want to see local projects included in the bond.
Sen. Jesse Kiehl, D-Juneau, for example, told constituents in a town hall before the start of the legislative session that if his vote is needed for a bond, he’d likely seek a high price. If that view is widespread, it could inflate the size of the borrowing request.
“One of the challenges that we have with issuing bonds is controlling the size of the bond package,” said Sen. Bert Stedman, R-Sitka and co-chair of the Senate Finance Committee.
“It may start out at $200 (million) and may end up at a billion. So we need to proceed with a little bit of caution,” he said.
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