We should invest and save the oil surplus

Posted: Monday, September 26, 2005

This editorial first appeared in the Voice of the (Anchorage) Times:

High oil prices, while a shock to the wallet at the gasoline pump, likely will turn out to be a bonanza for the state treasury.

Depending upon who you talk to, if oil prices stay in the $60 per-barrel range, Alaska could have anywhere from a $1 billion to $1.5 billion surplus rather than facing the grim prospect of tapping reserve funds to make ends meet - the norm only a few years ago.

Already, interests across the state are lining up for a share of the predicted surplus. Gov. Frank Murkowski is hinting the money could be part of a $4 billion state investment in a gas line. The University of Alaska is seeking something like $47 million. School districts want increased educational spending at the local level, and before it is over, every group you can imagine will have its hand out.

Lawmakers, if oil prices hold up and the surplus pans out, will face intense pressure to spend every last cent. But should they? Are there better ways to get a bang for every surplus buck? Are we in danger of spending ourselves to levels that will be unsustainable when the bubble bursts?

While the state still faces deferred maintenance costs and deteriorating infrastructure, a good argument can be made for socking any surplus away in the Constitutional Budget Reserve for the proverbial rainy day. The fund now contains about $2.2 billion and could be fattened, and the interest generated could help pay for government operations.

Some say any surplus would better be used to start plugging the $5.7 billion deficit in the Public Employees and Teachers retirement systems, or setting up an education endowment to lighten the load on local property taxpayers, or a community permanent fund that would ease cities' fiscal woes brought on by the demise of state revenue sharing. There are even those who advocate just dividing up any surplus and handing it out to Alaskans.

Lawmakers mulling over any expenditures of a surplus should ask themselves many questions. Is this expenditure really necessary? If the outlay is for a new program or capital project, can it be sustained if oil prices drop? What will the long term effect be?

It likely is tougher to be a legislator during times of plenty than in the midst of a fiscal famine because it is so much harder to say no to all the competing interests when the cash is flowing. But Alaska's future requires preparation for the bad times during the good, and saying no is a part of that process.

In our view, a gas line investment, a community permanent fund, an education endowment or socking any such money in savings are probably the best ideas, but we recognize a lot could change between now and next June.

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