March 30, 2008
Sunday

As we begin, I agree it is not irrational to believe giving a lot of money to politicians is like giving a credit card to your teen before they head to Vegas on a class trip.

But this week I want to convince you there can be exceptions to the rule. I want to convince you this legislature is that exception to the rule--that we've been prudent despite the gusher of general fund dollars due to high oil prices coupled with our new, fair oil taxes.

As we begin, here are two opposing paradigms I suggest define prudence and imprudence:
Plausible scenario #1, best articulated by oil industry ads and other pessimists, is 'give Alaska policy makers more money and they'll go on a spending spree'. (See the accompanying "big bucket o' bureaucracy" ad by the oil industry from last year opposing higher taxes on multi-nationals pumping Alaska's oil.)

Implausible scenario #2, best articulated by against-the-grain optimists, was the legislature does a slash and stash--slash the conservative governor's proposed operating budget and stash more in savings than she suggested.

If you went with scenario #2 instead of the conventional-wisdom-#1 scenario peddled by the oil companies and parroted by many, you are a winner. Not as big a winner as the state's savings accounts, but still a winner against the odds. I appreciate that your optimism matched mine.

On the slash side, the FY 09 operating budget submitted by the governor to the legislature is now about $50 million lighter after passing through the House and the Senate. On the Senate side, we not only cut the governor's spending plan, we also constrained future operating budget growth in the out years by not accepting 148 permanent full-time positions she requested--positions we'd need to pay for year-after-year. * We did this while adding money to education and neighborhood protection initiatives.

On the stash side, instead of $4.6 billion in surplus general fund revenues going into that big bucket o' bureaucracy, it's going into rainy day savings accounts. These savings accounts buffer Alaska from declining oil production and drops in oil prices. By the end of this session, I expect total savings of general fund revenues across the FY 08 and FY 09 fiscal years will be at least $6.5 billion. The governor's proposed two-year savings plan contemplated about $4.55 billion in savings. **

Still to go is the capital budget. It will be considerably larger than the governor's request (at this point the capital budget has about $70 million more in general funds than the governor sought). The extra dollars, right now amounting to about 15 percent of what has so far been added to savings, will help us catch up on deferred maintenance and improve transportation and other public infrastructure. Unlike the operating budget, though, extra dollars in the capital budget this year don't commit us to ongoing expenditures in the out years in the same way dollars for the bureaucracy do.

So, the bottom line is the big bucket o' bureaucracy is smaller than proposed by the governor and the savings accounts are much, much larger. Not bad. * The final legislative operating budget may go up or down as the House and Senate reconcile differences in the two budgets.

Note: I count savings as deposits from the FY 08 general fund revenues and presumed FY 09 general fund revenues to the rainy day budget reserve accounts or extra deposits to the rainy day permanent fund earnings reserve account, and the permanent fund. I did not count money transfers from the rainy day permanent fund earnings reserve to the permanent fund corpus--that's a transfer from one great savings account to a sacrosanct savings account. I also did not count the governor's proposals to deposit general fund dollars into accounts for designated spending on transportation, energy, and education though I did count her spending to pay down pension debt as savings.

About: Senator Kim Elton is a member of the Alaska Legislature representing Juneau.

Received March 28, 2008 - Published March 30, 2008

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