Friday, October 31, 2014

Completing the record ...

In the final days of the current election campaign some supporting the current Governor and incumbent legislators have tried to make much of the fact that the state budget has been reduced the last two years. But that needs to be viewed in the context of the complete record.

As the chart at the end of this column makes clear, the budget increased the first two years following Parnell's 2010 election by $2.3 billion/year, a 42% increase (from $5.47 to $7.78 billion); in the two subsequent years it has been reduced by $1.6 billion (a 21% decrease), for a net overall increase over the four year period of roughly $.7 billion (13% percent).  During the same period inflation has risen only 9%.  In short, despite the reductions, the Governor and legislature haven't even reduced the budget to where it was at the beginning of Parnell's term, much less started to repair the damage that occurred in the meantime by making the additional reductions necessary to return the budget to sustainable levels (the ISER calculation of the sustainable level made before the beginning of the last session was $5 billion).

Some argue that the increase over the first two years was the fault of the Bipartisan Senate Coalition.

But Art 2, Secs 15 and 16 of the Alaska Constitution provide that "[t]he governor ... may, by veto, strike or reduce items in appropriation bills," which may be overturned only by a supermajority (three-fourths) of the legislature sitting in joint session.  Even in the "dark days" of the Bipartisan Coalition (many of whom were Republicans), the Governor would have been able to rally the support of 16 members from the House alone to uphold a lower, sustainable budget level. He didn't even try. Instead, he signed the highest and third highest budgets in state history.

Finally and as importantly, even though the Governor and legislature did reduce spending over the last two years, those reductions haven't even kept pace with the fall in revenues over the same period. From FY 2013, revenues have dropped from $6.92 to $4.52 billion (a fall of $2.4 billion).  During the same period, however, spending has only dropped from $7.8 to $6.2 billion (a reduction of $1.6 billion).  Focusing on only one line of the budget, the spending line, is similar to the sound of one hand clapping -- it produces nothing.  In order to paint an accurate picture, a consideration of both the spending and revenue lines is necessary.

Those focusing only on the spending line over the last two years are attempting to mislead voters into thinking the Governor and past legislature exercised sound fiscal judgement.  They didn't; the state is worse off financially than it was when the current Governor and the current legislature took office.  Completing the record tells the full story.