Capital budget cuts

Posted: Friday, May 28, 2010

The following editorial first appeared in the Anchorage Daily News:

The Alaska Legislature made a lot of people happy by passing a $3.1 billion capital budget in April. Gov. Sean Parnell has promised to make some of those people unhappy by using his veto power to cut that budget to a more conservative amount.

Gov. Parnell hasn't said much about what might be on the chopping block, other than a promise of fairness and reliance on constitutional priorities like education and public safety.

Governors typically don't tip their hands about what they'll cut, especially in an election year. In 2010, every veto carries a political charge.

Nothing will change that. There's an argument for every bit of spending in the budget, and few recipients are going to step forward and offer to forego their share for the sake of fiscal restraint. Witness Speaker of the House Mike Chenault of Kenai, who said he can live with cuts, but will try to restore any project cut from his district. Witness Anchorage Mayor Dan Sullivan, who has made across-the-board cuts in the city budget but called the city's $564 million share of the state capital budget "hugely successful."

But the governor and a minority of lawmakers are right to say that this capital budget is too big. Yes, we have the money to spend and reserves in the neighborhood of $10 billion to back it up. Compared to our brethren in the Lower 48, Alaska is fat and sassy.

But Alaskans know first-hand how fast a state dependent on oil prices can start running in the red, how fast reserves can burn. The governor needs to rein this budget in. He's said he has a figure in mind but hasn't disclosed it. We don't have a particular figure in mind, but these criteria should give us a leaner capital plan: Does it solve a pressing problem, or can it wait? Money for a new Medicare clinic in Anchorage makes sense to serve older Alaskans who have trouble finding primary care. On the other hand, how urgent is road paving in Girdwood?

Is the amount excessive?

A project may be worthy - but are we paying too much for it? If so, it's a prime candidate for the chop. This could be a tough call - for example, we support $76 million for the new state crime lab, despite criticism that it's overpriced and overbuilt. In this case, we think stronger prosecutions and swifter justice trumps delay to rethink costs.

What's the gain in jobs and overall economic boost? Part of the reason for Sen. Bert Stedman's staunch support for the capital budget was the argument that the state has socked plenty away, and can afford to put more Alaskans to work with capital spending - and, unlike the feds, do it with money in hand, not borrowed.

Fair enough. But the governor should put projects to the test - how many jobs do they provide? For how long? What's the likely economic boost for vendors and subcontractors? And who will they be - Alaskans or nonresident people and businesses? What's the ripple effect on the wider economy?

Maintenance costs

How much will each project bind us to future maintenance spending? We can't count on a budget surplus forever. Everything we build and buy has to include operations and maintenance down the road. How much can we reasonably afford?

Leverage

Some spending makes sense because of matching money. For example, $250,000 in state money for Anchorage's People Mover bus system fetches $1.8 million in federal money. That looks like a smart deal.

Local contribution

Former Gov. Sarah Palin made sense a few years ago when she cut many local capital projects with the explanation that they lacked a local contribution, through bonding or donations or sponsorship. A project looks a lot better when community members have invested in it themselves, through anything from tax money to bake-sale proceeds.

Applying these criteria isn't easy - there are multiple tradeoffs and judgments involved. The governor should take all the time the constitution gives him - and give us a leaner capital budget.



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