Sunday, August 12, 2012

Dear Governor ... The Future is Now

George Allen -- the Hall of Fame football coach (and the father of the former Governor and United States Senator from Virginia of the same name) -- had a favorite saying, "the future is now."  By that, Allen meant he coached to win in the coming year, not to develop players for the future.  Applying that philosophy, Allen was known for trading away draft picks year after year for proven, but older, veterans, to position his team to win in the upcoming year, rather than the potential to win somewhere down the road.  It was a successful philosophy; in 12 seasons as a head coach, Coach Allen compiled a regular season record of 116-47-5.

It is a philosophy that Governor Parnell would benefit from studying.  In a recent interview, Governor Parnell is quoted as saying "that he wants to rein in state spending."  But -- and this is the important part -- he also is quoted as saying "he hasn't yet set any parameters for agency spending."

As this page has discussed elsewhere, Alaska state spending has grossly exceeded sustainable levels for at least the last two budget cycles.  As calculated by the University of Alaska's Institute of Social and Economic Research ("ISER"), the current annual sustainable spending level from the General Fund is in the range of $5.35 billion.  The General Fund spending levels passed by the Legislature and approved by the Governor for the past two years, however, are in the range of $6.72 billion (FY 2012) and $7.6 billion (FY 2013).

As ISER has emphasized, spending in excess of sustainable levels passes on a "fiscal burden to future generations ....  The fiscal burden will grow every year ... at an accelerating pace, until the state reduces spending [to sustainable levels] or finds an alternative source of revenue.”   As I explain elsewhere, excess spending also has seriously undermined the Governor's priority of oil tax reform.

Reigning in state spending levels is an imperative.  ISER has made clear that failure to do so is adversely affecting future generations of Alaskans.  The Governor's own OMB Director has made clear that the failure to do so is undermining the Administration's efforts to reform oil taxes.

But just "any ol' level" of reductions is not sufficient.  To avoid continuing to transfer a fiscal burden to future generations of Alaskans, state spending levels need to be reduced to sustainable levels.  Any less simply panders to current Alaskans at the expense of the future of the state.  The Governor is responsible to both.

As George Allen used to explain, the "future is now."   Its not enough to say that state agencies need to reduce state spending in general; as the Chief Executive, the Governor needs to step up and tell them precisely what the overall target is, and then let them fill in the details within that guidance.

The maximum sustainable level of General Fund spending is $5.35 billion; that is the target.