Alaska editorial: Temporary surplus saps Senate enthusiasm for fiscal plan

Posted: Tuesday, December 21, 2004

This editorial appeared in Thursday's Anchorage Daily News:

A, long run of $40 a barrel oil gives Alaska a chance to stabilize the state's shaky long-term finances. After all, as recently as 1999, oil was scraping the $10 a barrel range. The state was saved from disaster only because it had stashed away hundreds of millions of dollars from settlements of revenue disputes with the state's big oil producers.

Prudent state leaders, looking at today's good fortune, would hope for the best and plan for the worst. They wouldn't bank on oil staying at such stratospheric prices for a full budget year. They would save some of the anticipated surplus, spend some of it on needs that were deferred during tighter times, and plan a way to reduce the state's exposure to wild swings in oil prices.

That probably isn't going to happen, judging from the remarks incoming Senate President Ben Stevens gave to the Anchorage Chamber of Commerce on Monday.

What a difference a year makes, he told the business crowd. Last year at this time, the talk was all gloom and doom about the shrinking supply of state spending money. Today, the state's looking at a big budget surplus. The big fight will be over what to spend it on.

He was asked by the audience if the state needs a fiscal plan. First he pitched putting a spending limit in the state constitution. Then said "We do have a fiscal policy (slight pause, for effect). It may be volatile ..." with a deadpan shrug, as the audience laughed. "But that's not such a bad thing," he said to more laughter.

On a serious note, he said the state has $1.2 billion in the Constitutional Budget Reserve. (He didn't point out that the state owes billions of dollars to the reserve, for budget-balancing withdrawals made in 11 of the past 14 fiscal years.) With the reserve, "We have the ability to withstand (oil price) volatility," he said.

"Imperfect as it is," he said of the state's fiscal approach, "it seems to work. If you're satisfied with the level of state spending, it works. If you're not satisfied with the level of state spending, then it doesn't work."

On that point, Sen. Stevens might want to talk to his fellow Republican in the governor's mansion. Gov. Murkowski recognizes that a growing state has growing needs. Among them is every politician's favorite cause, education. Last year, lawmakers added some $80 million to K-12 education to deal with huge pension shortfalls and begin offsetting a decade's worth of sparse classroom funding. Gov. Frank Murkowski, hardly a big-spending liberal, has called for another boost of $126 million over the next two years.

That education money is a good investment in the state's future. But it will be hard to sustain at more normal oil prices. The governor also has ambitious plans to spend money on expanding roads statewide. In addition, many lawmakers also recognize that the state has systematically shortchanged its maintenance responsibilities over the years as budgets were squeezed. Those bills are starting to pile up.

All in all, there will be plenty of pressure in Juneau to spend whatever surplus rolls in next year. Gov. Murkowski, to his credit, wants to earmark some of the surplus for balancing the budget in future years.

Last year, the governor and House tried and produced an imperfect plan for stabilizing state finances. Sen. Stevens' colleagues in the Senate Republican majority wanted nothing to do with it. With easy spending money at hand this year, lawmakers will probably show even less enthusiasm for prudently planning ahead.

There's a saying in sports: Sometimes it's better to be lucky than good. That's true in politics too - certainly for the so-called leaders in charge of Alaska's Legislature. When it comes to fiscal responsibility, there's little sign they'll be good. Unless they come to their senses, Alaskans are left hoping their risk-taking legislative leaders continue to be lucky.

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