Sunday, July 8, 2012

Only half the issue ...

Richard Mauer's lead article in today's ADN ("Tea Party goes after Senate coalition") reports on efforts by the Tea Party and others to defeat incumbent Republican State Senators who, they believe, have contributed to the approaching Alaska fiscal crisis by joining the so-called Bipartisan Senate Coalition over the last two legislative sessions.

If that accurately reports on the intention of the various Tea Party groups, they are focusing on only half the problem.  While the Senate has been problematic in achieving oil tax reform, the House also has been culpable on fiscal issues.  As discussed elsewhere on these pages (see Alaska Fiscal Policy|  Where We Have Gone Wrong), according to the University of Alaska's Institute of Social and Economic Research, the current "maximum sustainable" level of state spending from the General Fund -- the level that can be sustained indefinitely into the future even after oil runs out -- is roughly $5.35 Billion.  Money spent above that level is essentially coming from future Alaskans, by reducing the amount of the "nest egg" on which future Alaskan's will be able to rely.

To put it another way, if the current generation of Alaskans choose to spend $6 Billion for a few years, then future Alaskans will have only $4 Billion available to them once oil production declines.  The longer current Alaskans spend at rates above the current sustainable level, the less future Alaskans -- the current generation once it reaches retirement, our children and our grandchildren -- will have available to sustain them.

For those that think the Senate alone is creating this problem, its time to think again.  For this fiscal year, the state's Operating Budget, which originates in the House, is $5.67 Billion, an amount which alone exceeds the "maximum sustainable" spending levels identified by ISER.  Based on a continuation of the programs approved in recent budgets, the state Office of Management & Budget estimates in its "Baseline" Budget -- before "initiatives" -- that the Operating Budget will grow to $6 Billion in five years, and $6.7 Billion in ten.

And, its not like the House hasn't added to the size of the Capital Budget.   The House was the source of the $2.5 million (reduced to $2 million by the Governor) included in the 2011 Capital Budget that is funding the "Great Alaska Shootout Ticket Spree."  In a lesser reported story, the House also was the source of an additional $17 million appropriation to the UAA Sports Arena made in the final days of the 2011 session, that resulted in an overall appropriation of an additional $34 million to the Arena, rather than the $17 million initially approved by the Senate.

Clearly, there are "FINO's" (Fiscal conservatives In Name Only) in the Senate.  The same problem, however, exists also in the House.  The light should shine evenly on both.