Parnell's definition of 'deficit' raises ire

Dipping into savings not ‘deficit spending' governor says

Posted: Wednesday, January 26, 2011

Gov. Sean Parnell is denying the budget he presented to the Alaska Legislature relies on deficit spending, but he’s not disputing the state will have to dip into savings to balance the budget he presented.

Instead, he’s challenging the definition of “deficit spending,” saying if the state has the money in savings it’s not really deficit spending.

“Deficit spending is borrowing to cover your expenses kind of like the federal government is doing now, they’re borrowing 41 cents out of every dollar they spend,” he said.

The budget Parnell proposed calls for spending at least $25 million more than the revenue it expects to bring in, according to an analysis by David Teal, director of the Division of Legislative Finance that was shared with legislators recently.

To cover that, he said, Parnell proposed pulling money out of savings. Parnell did not dispute the Teal analysis, but Teal also said given fluctuations in oil prices and other factors, differences in budget estimates of less than $50 million are insignificant. So far this year oil prices are higher than anticipated, indicating a likely surplus.

Both Republican and Democratic legislators, though, have been taking shots at Parnell’s definition of “deficit.”

“I don’t agree with him in that definition,” House Speaker Mike Chenault, R-Nikiski, said Monday. “Deficit spending is spending more than you are bringing in regardless of what your savings account tells you.”

House Rules Committee Chairman Craig Johnson, R-Anchorage, likened it to a family budget.

“If you are paying your bills with your children’s college savings account, that’s probably deficit spending,” he said. “so by definition I think we qualify.”

Democratic legislators sided with their Republican colleagues regarding Parnell’s terminology.

“I think a deficit is, by its very definition, a situation in which you are spending more money than you are bringing in,” said Rep. Mike Doogan, a member of the House Finance Committee.

Parnell was adamant, though, that it’s only deficit spending when Alaska has to borrow to cover its spending, not if it comes out of savings.

“It’s living within our means when you are using available cash and not having to borrow for it,” he said.

Doogan said Parnell should adopt the common definition of deficit spending, seeing as he both submitted a budget calling for deficit spending and is calling for additional tax reductions of $1 billion a year or more.

He should stop denying what a deficit is, he said.

“I know the governor’s been saying that and he’s just wrong and should stop saying that,” Doogan said.

• Contact reporter Pat Forgey at 523-2250 or

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