I have been told that some in Juneau think the column I wrote earlier this week on the current budget end game (“#AKbudget| The FY 2015 end game (and its not looking good) …“) is unfair because it does not properly recognize the cuts which have been made in spending over the last two years since the current so-called “fiscally conservative” Senate Majority took office (and, according to claims made at the time, finally positioned the Senate to work with an equally minded House and Governor to produce “fiscally conservative” results).
The problem with that defense is that revenues are falling off faster than the current legislature has cut the budget and, as a result, while the so-called “fiscally conservative” Governor and legislature have made some cuts to the budget, the net deficit has continued to grow. In other words, the current Governor and legislature’s budget cuts haven’t even kept up with the revenue declines which have occurred since they took office, much less made any appreciable progress toward developing a sustainable budget going forward.
The budget for FY 2013, enacted the year before the new Senate Majority came to office, provided for $7.8 billion in spending (the highest in Alaska’s history), against what ultimately turned out to be revenues of $6.9 billion, resulting in a deficit of $900 million. Bad, certainly, and a huge lost opportunity to transfer a significant amount of money to the state’s “nest egg” as a hedge against the day that oil revenues inevitably decline.
But — and if some in Juneau didn’t like the previous column they certainly aren’t going to like this statement — not as bad as what since has occurred on the so-called “fiscally conservative” legislature’s watch.
The budget for FY 2014 — the first with the new Senate Majority — provided for $7.3 billion in spending (admittedly lower than the previous year yet still the second highest in Alaska’s history), but against projected revenues which are now estimated to total only $5.3 billion, resulting in a deficit of roughly $2 billion, or more than double the level incurred by the previous “spendthrift” legislature that some current legislators ran against. And this year, unless something dramatic happens in the last, few remaining days of the session, the current legislature is likely to pass a FY 2015 budget providing for somewhere in the range of $6.5 billion in spending, against a current revenue forecast of $4.5 billion, again resulting in a deficit of roughly another $2 billion, and that’s assuming oil prices stay at or near $105/barrel, something the market currently is betting against.
As I noted in the previous column the current Senate Majority listed three goals when it came into office, the third of which was to “Develop sustainable capital and operating budgets for current and future generations.” In an era where oil revenues remain relatively high — and even though lower than in previous years the state’s current and projected oil revenues still are relatively high from an historical perspective — developing “sustainable budgets” requires holding spending to levels below current revenues, so that some portion of the current revenues can be set aside for the benefit of future generations (when oil revenues will not be as high as now).
Measured against their own goals, the current Governor and legislature not only have not gained ground on the previous legislature, they have moved backwards from the point at which they started.
Regular readers of these pages will recall that sometimes I quote a column from the Wall Street Journal which focused on the reason why the national Republicans lost the House in the 2006 election. “It isn’t easy to spend so much money so egregiously that even Nancy Pelosi could campaign as a relative fiscal conservative,” the Journal wrote, “but the Tom DeLay Republicans managed the feat in 2006.”
I am not suggesting that the Alaska R’s are in danger of losing the House or Senate in the coming election, but their failure to live up to their own goals set following the successful 2012 election certainly is seriously damaging the brand and, likely, is going to have an effect on already marginal races. For a demonstration (and while there were other factors at work), Republicans likely need to look no further than what just happened to Adam Trombley in Anchorage’s east side assembly district.
My advice to actual fiscal conservatives in the coming final legislative votes on the FY 2015 budget is to vote against it (and any remaining, pending legislation that would increase the deficit further), even if by doing so it forces the legislature to extend the session to repair the damage. If you vote for the budget, you will own it. You will be part of the problem, not the solution.