Sunday, September 18, 2016

The last time Alaska had a moderate "Bipartisan Majority" was a fiscal disaster ...

Increasingly as the legislative races unfold we are hearing discussion of the formation of a moderate "Bipartisan Majority" in the House and, given the seats that are in play, potentially also in the Senate.

Indeed, some are suggesting that such an approach is the only way to get spending under control.  For example, one potential member recently argued to us that only a "Bipartisan Majority" can be counted on to make additional cuts, if not terminate, the oil credit program (or as we sometimes have called it, "Medicaid for Oil Companies"), which based on recent estimates threatens to become the second largest spending category in the next budget accounting for fully 20% of overall spending.

That may or may not be true -- our response to that suggestion was that it was Tammie Wilson, an R and one of the most fiscally conservative members of the House that helped lead the charge on that issue in the last session, likely will do the same in the next, and we doubt will be part of any such coalition.

But the discussion did get us thinking about what a moderate "Bipartisan Majority" could mean for overall spending levels.  True, it might help to reduce spending in some areas, but it likely also would lead to increases in others.  The important question is what the net result likely would be.

To analyze that we went back to the last time a moderate "Bipartisan Majority" ruled one or the other body of the legislature and looked at what happened.

The result -- from a fiscal perspective -- was an umitigated disaster.

  
As laid out in detail in the related table, during the six years of the last "Bipartisan Majority," which ruled the Senate from 2007-2013 (and set the budgets for FY 2008 - 13), overall annual state spending increased by 78% (against inflation over the same period of 16%).  Even removing the effects of wild increases in capital spending, the Operating Budget alone increased over the period by 68%, over four times the rate of inflation.

 Perhaps even more tellingly, the state went from a position of generating an annual budget surplus in the year before the formation of the "Bipartisan Coalition," to an annual deficit by its end.

Some members of that Coalition are fond of arguing that "yes, but" that Coalition also put substantial amounts -- according to the table above, roughly $9 billion over the six years -- in savings.

But there is an even more compelling "yes, but" that trumps that argument as well.  While they did manage to put an average of roughly $1.6 billion per year away in savings, over the same period they grew the Operating Budget alone by over $2.3 billion annually.  In doing so they did much to set the stage for the fiscal situation that has emerged as oil prices have receded (as they always do) from their cyclical highs.

In short, while they claim pride in the fact they were able to herd some spare cattle into a pen at the front of the barn during a period of unprecedented revenues, the fact is they left the back door of the barn door wide open through which more cattle escaped -- and thanks to the spending programs they put in place, continue to escape -- than they were ever able to round up at the front.

To be fair, of course, the Republican led majorities that have prevailed in both bodies since the end of the last Bipartisan Majority are nothing great to write home about.

For example, on the heels of ousting the "Bipartisan Senate Majority" in the 2012 election, the Republican-led Senate Majority that succeeded them promised, vowed, whatever other word invoking a solemn oath you want to use, to return to "sustainable budgets" (Goldsmith model) going forward.

They haven't even come close.  Before vetoes, the Operating Budget they passed this last session (for FY 2017) was still around $5.3 billion. A Budget Update, https://goo.gl/og675h at 4.  That is down only slightly (~7%) from the level left by the last "Bipartisan Majority."

Put another way, even at the end of four years of subsequent Republican rule, on net the Operating Budget is still up 55% over its pre-Coalition level, compared to inflation over the same period of only slightly over 22%.

Consequently it is fair to conclude that the Republican-led majorities haven't gotten the job done either.

But looking to the past as a guide, the solution to that isn't to veer back yet again toward a "Bipartisan Majority."  Instead in our opinion, the solution is to elect where ever possible actual fiscal conservatives (in either party, and they appear to exist in both) to replace the "go along," pseudo-fiscal conservatives that seem to have dominated at least the legislative leadership, if not also the membership, of both bodies since the ouster of the Bipartisan Majority -- and then, as importantly, support them when they seek themselves to rise to leadership positions.

Given the state's demographics, some argue that's not possible.  Maybe it's not, but as we have done the last two elections, we are going to continue to give it a try.

In the meantime, however, in any and all events the solution is not to return to a "Bipartisan Majority."  That's just asking for even more trouble ahead.