Wednesday, September 11, 2013

"You can't spend 105 percent of revenue," but that seems to be what we are on track to do ...

Yesterday and today the Senate Finance Subcommittee on Education & Early Development is holding hearings on the "cost drivers" in Alaska's education budget.

Late in the afternoon yesterday, the Subcommittee asked David Teal, the Director of the Legislative Finance Division, to return to discuss a "Preliminary Model for Calculating Future Costs."  As I take it from the testimony, the Subcommittee had asked Teal to develop an Excel based model that the Subcommittee and others could use to predict future costs based on various assumptions.

The full afternoon of testimony is available here.  Teal's testimony begins at 128:00 of the tape.  All of it is worth watching, but one piece stands out in particular.  Beginning around 150:00, Teal talks about the "Big 3" of state spending:  education, medicaid and retirement assistance.  Shortly after that he provides the quote of the day:
"You will notice that [currently] 55 percent of ... available revenue is spent on these three items.  By the time you get to 2022 its 105 percent of available revenue being spent on these three items.  Well ... you can't spend 105 percent of revenue ..."  
 He then goes on to state the obvious
"And ... [even if you reduce it to 100 percent] and spend all of your revenue on these three items, you've got nothing left for the rest of state government, at all. ... The fiscal future is not all that rosey."
As Teal makes clear earlier in his testimony, those predictions are made using ACES-based revenue forecasts.  Based on the evidence submitted by the Administration during the last legislative session, the future isn't any better over this period under SB 21.

To be blunt, this Governor and this Legislature, by approving -- and indeed, expanding -- this Governor's budgets, are spending Alaska off a fiscal cliff.  This Governor has had four years to make things better; instead, he has made things worse, much worse.  As Amanda Coyne reported starkly in a recent column, "[t]he budget has increased 55 percent since Gov. Sean Parnell took over."

There is still time, and a way, to provide Alaska with a bright future.  If this Governor doesn't step up to the plate in his December budget, someone else will.