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Alaska Editorial: Constitutional gimmicks aren't fiscal responsibility

Posted: Tuesday, January 11, 2005

This editorial appeared in Wednesday's Anchorage Daily News:

Many Alaska lawmakers, especially in the Senate majority, would like Alaskans to believe that a long-term fiscal plan has to start with a constitutional spending limit. Heading into this month's legislative session, Sen. Fred Dyson has prefiled a measure to impose one.

Wait: Don't we already have a spending limit?

In fact, we do. Passed in 1981, at the height of the oil boom, the constitutional spending limit has never limited a single penny of state spending. The cap was set at $2.5 billion, with a host of exclusions, and indexed for inflation and population growth. Today the supposed limit on state spending is about $6.8 billion, according to the state Office of Management and Budget.

State spending has never come close to hitting that ceiling. The supply of easy spending money steadily shrank, thanks to the oil price crash of the 1980s and a 50 percent drop in Alaska's oil production. Meanwhile population growth and inflation steadily pushed up the spending cap.

Alaska's spending "limit" has another oddball feature. The 1981 amendment says one-third of the spending limit "shall be reserved for capital projects and loan appropriations." State budgets have never come close to following that requirement. In the past two years, the capital project share of the spending that's supposedly "limited" hasn't topped even 4 percent. Every budget in the past 20 years has violated the spirit, if not the letter, of this constitutional edict. (In 1983, the attorney general conveniently opined that the one-third capital requirement is only triggered when spending hits the cap.)

What happened with the spending limit is a reminder of how inferior an artificial constitutional gimmick is to actual fiscal responsibility.

Here's another reminder: Lawmakers owe billions of dollars to the Constitutional Budget Reserve and show no inclination to pay it back.

Over the years, they've taken $5 billion from the CBR, which was built with huge settlements of tax and royalty disputes with Alaska's major oil companies. The reserve is supposed to stabilize state spending from wild gyrations in oil revenues. Withdrawals in bad years are supposed to be repaid by deposits in good years. But the odds lawmakers will repay their multibillion debt to the budget reserve are about the same as finding Teamster boss Jimmy Hoffa alive.

When Alaskans hear legislators talk about spending limits, balanced budget amendments or tax caps, just remember: These folks have tried gimmicks like that before, and they haven't helped.



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