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5-year cutting mission ends

Opinions differ on whether budget-slashing plan was successful

Posted: Thursday, May 04, 2000

With the fall of the gavel Wednesday night, the Republican five-year budget plan came to an end.

GOP lawmakers announced a successful conclusion to their budgetary mission to cut spending and close the state's fiscal gap. Democrats said the budget-cutting plan was a policy failure they're happy is over.

Rep. Eldon Mulder, an Anchorage Republican and co-chairman of the House Finance Committee, pointed to a spending plan for 2001 that showed a $30 million cut to state general fund spending for the coming year.

``The five-year plan has come to fruition,'' he said.

Overall spending in the next fiscal year, which begins July 1, is at nearly $2.3 billion. With federal and other funds added, the budget nears $5.1 billion. Add in dividend and inflation-proofing of the Alaska Permanent Fund and state spending hits $6.9 billion.

Mulder said $262 million less in general funds will be spent in the 2001 fiscal year than before the cutting plan began, which beats the five-year goal by $12 million.

David Teal, head of the Legislative Finance Division, said his efforts to put together numbers for the last five years were hampered by the way budget records are kept. He came up with $258 million of reductions over the GOP plan's life.

``It's always difficult to compare years,'' he said. ``If they came up with another $4 million, OK. It's still about $250 million.''

Mulder said not every target in the plan was met. But, he said, the state's fiscal picture looks a lot better with the cuts than if the spending had been allowed to grow. And, he said, it was done with no new general taxes.

Rep. John Davies, a Fairbanks Democrat, said the five-year plan may have technically met its budget-cutting goals, but there's a lot of smoke-and-mirrors in the numbers. Funding sources have been switched, he said, one-time pots of money have been emptied and, the fiscal gap the plan was supposed to close is still there.

Without the lucky happenstance of high oil prices, that budget gap would be closer to $1 billion, he said.

He said the plan's cut-driving budget decisions have hurt the state. The University of Alaska, he said, and education around the state suffered because of the cuts. Teachers are being laid off, and the state's economy is stalling, he said.

``Our kids are getting less education, not more,'' Davies said.

In the coming year year, the savings account called the Constitutional Budget Reserve will be tapped for about $380 million to cover the gap between state revenues and spending.

The five-year plan, as introduced in February 1996, was to have eliminated the fiscal gap. It called for $250 million of new revenues along with the equivalent budget cuts.

Senate President Drue Pearce, an Anchorage Republican, said the wobbly oil markets and the recession that hit the economies of most Asian nations undermined the five-year plan. Though the fiscal gap is not gone, it's smaller than it would have been.

``It's not closed, but we're sure spending a lot less than we were,'' she said. ``If we'd continued spending like we were, the Constitutional Budget Reserve would be about gone.''

If the voters had approved a long-range fiscal plan put together by the Legislature for a September ballot, she said, the gap may well have been solved. But voters overwhelmingly rejected that plan.

The budget reserve, now projected to last the state through the year 2004, is at about $2.4 billion.

Davies said in the aftermath of that vote, there was no true effort by the majority to put together a fiscal package that does more than cut.

``We desperately need a long-range fiscal plan,'' he said.

Rep. Ben Grussendorf, a Sitka Democrat, said he never thought the GOP plan would solve the state's fiscal problems. And the additional $250 million in new revenues it called for haven't shown up.

``It's all on how you shuffle the numbers,'' he said. ``But I see no real solution to the fiscal gap. If you judge them by their spreadsheet, they failed. But, for five years, they could say they had a plan.''



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