State to repay debt to itself

Oil revenue surplus to fully fund Constitutional Budget Reserve for the first time in 16 years

Posted: Wednesday, March 31, 2010

A combination of high oil prices and spending restraint has Alaska poised this year to do what few thought possible - repay billions the Legislature borrowed from the Constitutional Budget Reserve in recent years.

Legislators, who only recently were trying to assign blame for deficits, are now claiming responsibility for paying back the borrowed money.

Rep. Mike Hawker, R-Anchorage, said the supplemental budget - passed this week by the House of Representatives and soon to be considered by the Senate - is historic in nature. It contains $401 million to make the final payment to the CBR, from which the state had borrowed $4.45 billion over the years.

Voters created the fund in 1990. It is funded with legal settlements from oil tax and royalty disputes. Ten times before 2006, the state dipped into the CBR to balance its budget.

By the start of this fiscal year, billions had been paid back; with this year's $401 million appropriation, the payback will be complete

"With the passage of this bill, the Constitutional Budget Reserve will have been made whole," said Hawker, who carried the bill and guided its passage as co-chair of the House Finance Committee.

The supplemental bill passed 40-0, with support from both Republicans and Democrats.

The only discussion on the House Floor came from Rep. Woodie Salmon, D-Chalkyitski. "This bill is made possible by the 2007 oil tax reform. Thank you, Mr. Speaker," was all he had to say to make his point.

In November 2007, Salmon and a majority of legislators joined with then-Gov. Sarah Palin to adopt a new oil tax system to replace the corruption-tainted Petroleum Profits adopted earlier.

That new tax, called Alaska's Clear and Equitable Share Act, included a progressivity formula that brought in more money when oil profits rose. Soon thereafter, oil prices rose to unprecedented levels, reaching $147 dollars a barrel at one point.

Hawker and Chenault voted against ACES in 2007.

In 2008, the state's surplus was big enough to enable it to pay back $3 billion during that year alone.

"I never fathomed that in this short a period of time, we'd be able to pay back the CBR in whole, to make it completely whole," said Sen. Johnny Ellis, D-Anchorage, who serves as majority leader in the Senate Working Group coalition.

Ellis said he felt a special responsibility to make sure the reserve fund was paid back, having served in the Legislature at a time when lawmakers were forced to use the CBR to balance the state's budget.

A few years ago, he pointed out, he and his colleagues were wearing buttons that proclaimed the "Senate is on a Savings Spree" as they fended off calls to use the money for other things.

Ellis said he was happy to see the CBR repaid in the House supplemental budget.

"I know that people are crowing about that in the House; good for them," he said.

He also praised Gov. Sean Parnell for joining the effort to replenish the reserve fund.

"There's been a real coming together for fiscal responsibility," he said.

The state currently has more than $8.6 billion in the Constitutional Budget Reserve, an amount that will total more than $9 billion after the additional contribution. That money is intended to help soften the blow of future oil revenue declines.

The state also projected another budget surplus this year, for the fourth year in a row, which will lead to additional savings.

• Contact reporter Pat Forgey at 586-4816 or patrick.forgey@juneauempire.com.



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