Contributed by Senator Mike Shower
Appointed to fill Mike Dunleavy's senate seat in February, I was in for an eye-opening experience. I've seen combat as a fighter pilot, yet that seemed simple compared to figuring out how Alaska's budget process works, and perhaps less dangerous to my health!
A few highlights:
First, the governor has great power in Alaska, setting the tone for the budget based on the initial and subsequent request. Second, the legislature still holds the power to appropriate how much money is available to spend. Third, it's nearly impossible to get a straight answer from anyone on what money is spent where, how much is actually spent and how its accounted for, i.e. the true budget numbers.
Much like the elusive pot of gold at the end of the rainbow, it's hard to catch the leprechaun. Governor Walker's request started as a budget increase over last year, and the Democrat-controlled House added hundreds of millions more to it. To the Senate's credit, it was reduced somewhat, but still ended up hundreds of millions over last year. House Republicans tried roughly 80 amendments worth $200 million in budget cuts and were voted down by the Democrats on every single one. I attempted a small cut on the Senate floor, a mere $1 million, only 2 other senators voted for the cut.
Alaska's revenue was about $2.5 billion while spending roughly $4.5+ billion on the operating and capital budgets this year. We're $2 billion short, so for the first time in our history we took money from the Earnings Reserve Account (ERA), and the rest from the Constitutional Budget Reserve (CBR), to pay off the balance. Those numbers are with a $1 billion-dollar dividend payout, but by law it should have been $1.7 billion. Gov. Walker and the legislature leadership agreed to cap the dividend at $1600 vs. the statutory nearly $2700 it should be for each eligible Alaskan.
With little appetite to reduce government size or costs, the flight path is upward for spending money. With oil prices rising, I predict the legislature will feel free to spend even more. Gov. Walker's Medicaid expansion alone is skyrocketing state deficit spending. There exists no strong mechanism to prevent the governor or legislature from spending what they want, then taking whatever amount they need to pay for it. The law nor source seem to matter, we'll take from the ERA, CBR or just give you a smaller dividend check.
The percent of market value approach being pursued by many legislators is concerning. The first version had the language that we “may” appropriate money to the dividend vs. “shall”, and various versions give anywhere from 60-70% of the earnings to the government with the people getting whatever is left over. Once we start down this path, I fear the dividend could soon be a thing of the past; as government grows, we have to pay for it. Our working population is too small to tax our way to closing the deficit spending gap. What's the only big and easy to grab funding source left? The Permanent Fund.
Two solutions I'd like to see to help fix our budget woes:
First, putting the 50/50 split formula into the constitution, and second, enacting a constitutional spending limit. Both would limit the growth of government and give stability to our budgetary process. Both make it exceedingly difficult for future governors and legislators to spend more than we can afford due to the high standards those mechanisms set. A win-win for all of us.