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Alaska editorial: Proposed state budget cuts are not so easy

Posted: Tuesday, March 20, 2007

This editorial appeared in the Anchorage Daily News:

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Gov. Sarah Palin said in announcing $150 million in proposed budget cuts: "I am committed to working with the Legislature and the public to craft a budget that provides the services Alaskans expect and that is sustainable in the future."

No disrespect meant to the governor, but that is mathematically impossible.

Alaskans expect to get what they want, and they expect it for free - plus the free money of permanent fund dividends. None of which is sustainable for the long term, as long as oil production is falling, the state collects no sales or personal income taxes, and permanent fund earnings can't be used for anything but the popular dividends.

So until Alaskans are willing to accept the math, public officials will continue to nibble around the edges but never really bite into the problem. Alaskans love to talk about cutting state spending - until those cuts nick their own favorite programs. Then they protest.

The governor's budget amendments look a lot like the proposals of others who came before her. Much of the budget reductions are not real cuts but rather are based on switching funding sources, using this year's surplus for next year's spending, and hopes of finding undetermined, money-saving solutions to long-term, costly problems. Some of the solutions will require legislative action in the next 10 weeks, so savings are far from certain.

For one, the administration is counting on a $42 million savings in the employer contribution rate to public employee retirement funds. How? Through "financing mechanisms" yet to be proposed.

The most talked about "mechanism" is borrowing a lot of money, investing the cash, then hoping the investments will earn more than the state pays in interest on the loans. The retirement funds could keep the profit. That's not a budget cut; it's a bet on future investments.

The administration also is counting on almost $8 million in savings by not sending 350 inmates to the Arizona private prison under contract to the state. Alaska for years has sent its overflow south. Most of the savings, however, will disappear as the Department of Corrections pays the costs of accommodating the prisoners at Alaska facilities.

The governor assumes $10 million in savings if Medicaid succeeds in "cost containment" for mental health and personal care attendant programs. Always an iffy assumption.

And the budget plan counts on close to $6 million in savings, assuming gasoline and diesel prices stay down next year. Anyone want to take that bet?

OK, those are some of the hopeful budget cuts. What about real cuts to real services?

• $1.5 million from child care assistance, leaving the program at last year's level. Less money to help single parents.

• Taking away an $11 million increase in state aid to hospitals struggling with the costs of uncompensated care - those are the bills left behind by people without insurance.

• $1 million less than the Department of Natural Resources had requested for wildfire season preparations.

• A quarter-million dollars less for fish and wildlife protection officers' flight time and enforcement vessel patrols.

All of the above will draw protests from someone.

Judging by her greater reliance on hopeful savings in fuel, retirement costs and other spending that doesn't really touch anyone, it appears the governor is learning the smart - and safe - ways of budget "cutting."



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