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March Madness: Bracketing Alaska's Budget

Alaska Legislature tackles budget during regular play


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By the time this March issue of Alaska Business Monthly is published the state may be close to passing the FY2017 Operating Budget. An interesting and unprecedented measure passed the Alaska State House of Representatives by a vote of 38-1 on February 8.

 

House Concurrent Resolution 23

Suspending Rule 23(a), Uniform Rules of the Alaska State Legislature, relating to measures in possession of standing committees and special committees of the Alaska House of Representatives, and Rules 20, 21(c), and 24(a), Uniform Rules of the Alaska State Legislature, restricting committee meetings of the Alaska House of Representatives to measures that substantially relate to and have as their primary purpose appropriating, raising, or allocating state revenue, until the Alaska House of Representatives passes a state operating budget to the Alaska Senate.

 

Efforts by the Alaska House of Representatives could possibly be likened to the NCAA’s March Madness with both spending and revenue possibilities facing sudden death elimination. Team Permanent Fund Earnings is pitted against Team State Income Tax. State Income Tax loses. Team Permanent Fund Earnings advances to a match with the dangerous Team New Resource Industry Taxes. New Taxes loses. Similarly, Team PFD Only is pitted against Team Share Earnings to Fund State Government. In this election year, the winner of that match is anybody’s guess.

Appropriations brackets could pit Health and Social Services against Education and Early Development, Corrections against the University of Alaska, Transportation against Public Safety, Oil Tax Credits against State Assistance to Retirement, the Legislature against Administration. More likely the bracketology will include line items throughout the $6.8 billion FY2017 Operating Budget submitted by Governor Bill Walker.

It’s commendable that the Legislature is tackling the budget during regular play [January 19 through April 17] and not overtime [special sessions]. Let’s hope they don’t go for a slam dunk by just using the Constitutional Budget Reserve Fund to balance the Operating Budget because there’s only enough money left in that for two years, if that. Recent rumblings are for a $4 billion deficit due to rising mandated formulaic spending and continued low oil prices.

 

The legislative process of passing the Operating Budget is no game, though, and needs to include a long, hard look at facts and choices.

 

University of Alaska Institute of Social and Economic Research Director and Professor of Economics Gunnar Knapp points out in “An Introduction to Alaska Fiscal Facts and Choices” that the “Legislature is allowed to use the earnings [of the Permanent Fund] for any purpose. We have been using most but not all of the money for dividends and inflation proofing.”

Knapp also presents a simple formula to help Alaskans understand the state’s “fundamental fiscal tradeoffs—over any period of time—are what we can spend equals our income minus what we add to our savings.”

The solution is not simple though, and he points out that properly cutting spending “takes time to debate the state’s priorities, to figure out better ways of delivering services, and to find efficiencies.” Also that “it’s politically hard and it will get harder.”

 

Knapp is compelling and informative—and so is the March issue of Alaska Business Monthly. The team has put together another really great magazine. Enjoy!

 

 

This article first appeared in the March 2016 print edition of Alaska Business Monthly.

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