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Alaska can’t borrow, but it sure can save

Alaska has history of deficit spending, despite governor's call for federal balanced budget amendment

Posted: August 16, 2011 - 10:09pm

While some other states — actually, most other states — are struggling to balance their budgets, Alaska is awash in money and boosting spending.

Even in tougher times, however, Alaska can do something that most other states cannot do: It can spend more than it brings in.

Over the last two decades, Alaska hasn’t balanced its budget about half the time, but has instead used savings to meet its expenses, according to division of Division of Finance records.

That’s been done by setting aside money in boom times to spend in down years.

Now, there’s national focus again on a balanced budget amendment to the U.S. Constitution, and a recent deal on raising the debt ceiling that calls for Congressional votes on such an amendment.

Alaska Gov. Sean Parnell has called for a national balanced budget amendment, even though his own state doesn’t have an explicit balanced budget provision in its Constitution.

Amendments to the U.S. Constitution require approval by two-thirds of each house of Congress, and then ratification by three-fourths of the states.

“If a balanced budget amendment is sent to the states, I will support it for ratification. I urge my fellow governors, Republican and Democratic, who understand how to balance budgets, to join this effort,” Parnell said in a statement issued last month.

In Alaska, the state has set aside more than $10 billion on a Constitutional Budget Reserve, into which it can dip in lean times to “balance” its budgets. That fund is in addition to the Alaska Permanent Fund.

It was into that reserve that Alaska has repeatedly dipped, including several years during which Parnell served on budget-writing legislative finance committees.

While in most cases the economy has prevented other states from building surpluses, some states have legal provisions barring them from building up savings.

Numerous members of Congress and pundits advocating for a requirement for a balanced federal budget have claimed that “every” state must balance its budget, but a report issued last fall by the National Conference of State Legislatures said that’s not true.

While most states have some sort of balanced budget requirement, with Vermont a notable exception, many other states require only their operating budget to balance, or have other exceptions.

While Alaska doesn’t have a balanced budget amendment, there is a provision in the Alaska Constitution that bars borrowing money to balance a budget, said Gordon Harrison, author of “Alaska’s Constitution: A Citizen’s Guide.”

“We don’t have any ability to float any bonds to pay our bills,” Harrison said.

While Alaska doesn’t have an explicit balanced budget constitutional provision, its prohibition on borrowing for operating expenses largely accomplished the drafters’ goal of preventing deficit spending, he said.

Given the state’s precarious budget situation at the time of statehood, it is unlikely that big surpluses were anticipated, he said.

House Democratic Leader Beth Kerttula, D-Juneau, said Parnell’s call for a national balanced budget amendment isn’t a good idea because it eliminates government’s ability to respond to economic downturns.

And neither, she said, is his call for oil tax reductions that would make it impossible for Alaska to balance its budget.

“Alaska is in the enviable position that it is because of our (Alaska’s Clear and Equitable Share) tax getting us a fair share of our resources,” she said.

“You sure wouldn’t want to lose that tax if you were concerned about keeping our budget in balance,” she said.

Alaska hasn’t had to dip into its savings since the 2005 fiscal year, and high oil prices and the ACES tax have enabled the state to save billions that can be used to prevent future deficits.

Alaska this year will put away more in savings, Parnell said in June while vetoing hundreds of millions in state spending.

“We have to save while its harvest time,” he said. “There will be lean times when oil production goes down.”

In recent years, the state has used strong capital budgets to spur construction jobs, and stave off the recession in Alaska.

Many other states can do that with bonding for capital projects despite balanced budget requirements, but Alaska has been able to do that with savings.

• Contact reporter Pat Forgey at 523-2250 or




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