Monday, November 4, 2013

A Third Way (or how Mayor Dan Sullivan can restore some of his political lives) ...

While I don't usually write on municipality issues, an article in yesterday's Anchorage Daily News on an issue coming before the Anchorage Assembly this week caught my attention because of its state level implications.

The article -- Tennis courts or hockey rinks? Assembly to consider competing spending plans -- reports on the Assembly's upcoming vote Tuesday on how to handle the state money appropriated last legislative session to build new, indoor tennis courts to be owned by the municipality.  The appropriation of state money for this purpose was requested by the Alaska Tennis Association.  I have written on the issue before (see "Mayor Dan Sullivan is using up his nine political lives and may be on the last (at least with me) ..."; "Naming names ...").

The issue before the Assembly appears to be coming down to whether to spend the state appropriation on the tennis courts, or to update certain municipally owned hockey rinks.  Spending the money on hockey rinks at least comes closer to the purpose of the appropriation described to most legislators at the time they voted to approve it as part of this year's state budget.  (According to this and previous ADN stories, the appropriation was included within the bill  in a category earmarked for "deferred and critical maintenance.")

But that choice loses sight of the bigger picture.

The bigger picture is that, in light of where state finances are headed based on current spending levels (under either SB 21 or ACES), the state shouldn't be spending this money at all -- it should be saving it.

As we have written about on numerous occasions, current state spending levels are heading Alaska straight toward a huge fiscal crisis starting either later this decade or the beginning of the next.  As summarized by a report earlier this year from the University of Alaska - Anchorage's Institute of Social and Economic Research (ISER):
Right now, the state is on a path it can’t sustain. Growing spending and falling revenues are creating a widening fiscal gap. In its 10-year fiscal plan, the state Office of Management and Budget (OMB) projects that spending the cash reserves might fill this gap until 2023 .... But what happens after 2023? Reasonable assumptions about potential new revenue sources suggest we do not have enough cash in reserves to avoid a severe fiscal crunch soon after 2023, and with that fiscal crisis will come an economic crash.
 At that point there will be a significant issue even meeting the state's obligation to the so-called "Big 3" spending categories -- K-12 education, medicaid and retirement assistance (including PERS/TRS) -- much less room remaining for anything else (for example, such as the state's university system).

As a result, in all fairness, the issue before the Assembly this coming week is not whether the state appropriation should be spent on tennis courts or hockey rinks.  That is a false choice -- in many ways akin to "fiddling while Rome burns."

The choice instead is really about whether the money should be spent on either use now at all, or instead put back into savings to help prepare Alaska to avoid the fiscal future it is now painting for itself and as a means of enabling Alaska both to fund the "Big 3" and other legitimate functions of government going forward.

As the ISER report continues, "If Alaska had $117 billion in cash reserves and the Permanent Fund by 2023, the state would be on the path to sustainable spending far into the future. But as the adjacent figure shows, that’s twice what the state has in financial assets today. So the state needs to sharply step up its savings rate, starting now."

The Mayor and fiscal conservatives and others concerned about Alaska's future on the Anchorage Assembly should be adopting a third way to deal with this issue.  Instead of appropriating the money at all, the Assembly should vote to "just say no" and return the money to the state with a request that it be put into state savings.  That would send a powerful message that the Anchorage Assembly, at least, understands and is seriously concerned about the state's fiscal future.

And if Mayor Sullivan led that charge?  Well, it would restore several of his political lives, at least with  this fiscal realist.

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