As mentioned in Amanda Coyne’s column Friday, Governor Parnell has been sending out campaign material and otherwise taking credit for exercising sound fiscal policy during the last legislative session. As I was doing some calculations this morning, I thought a look at the Governor’s real fiscal record might be helpful when evaluating his claims.
The above chart plots unrestricted general fund revenues (in blue) against spending (in orange) over the five budgets for which Parnell has been responsible since assuming office in 2009 (the FY 2010 budget had already been set at the time he assumed office). As is clear, in his first budget (for FY 2011) Parnell was indeed a fiscal conservative, limiting spending to $5.47 billion, well within the “sustainable spending” limits applicable at the time. It may be useful to recall that the FY 2011 budget was set in 2010, an election year in which the Governor was being challenged in both the primary and general elections by opponents sounding fiscally conservative themes.
Beginning the following year — the year following the election — however, spending started to grow, first to $7.01 billion (a leap of nearly 30% over the previous year’s level), then to $7.78 billion (a year-on-year leap of an additional 10%, and fully 40+% over FY 2011 levels). While Parnell subsequently has attempted at times to lay blame (podcast beginning at 5:35) for those budgets on the Senate Bi-Partisan Majority, the fact of the matter is that under the Alaska Constitution the Governor has the authority to line-item veto all or any portion of the spending levels proposed by the legislature, as long as he is supported in the event of an attempted override by 20% +1 (i.e., 13) members of the legislature.
Even in the “darkest of times” under the Senate Bi-Partisan Majority, the Governor easily would have been able to muster 13 members of the legislature to support lower spending levels. He didn’t even try.
Since the FY 2013 budget — the all time record high for Alaska — spending indeed has fallen during the two subsequent legislative sessions. But as the chart demonstrates, revenues have fallen even faster. While spending has dropped roughly 20% since the all time high of FY 2013, revenues have collapsed by 35%.
In short, the Governor’s reductions in spending over the last two years have not even kept up with the pace of revenue decline over the same period, much less made up any ground toward returning to a balanced — and sustainable — budget.
Indeed over the last two legislative sessions — sessions in which allies of the Governor have held clear, unassailable majorities in both legislative bodies — the legislature has enacted, and the Governor has approved, the two largest budget deficits in Alaska’s history. (For an historical perspective see the chart in the middle of an earlier column on these pages.)
Put another way, taking into account the transfer this session of $3 billion from the Constitutional Budget Reserve to the PERS/TRS account, in a single two-year period this Governor (and Legislature) have managed to drain 35% from the state’s two largest savings accounts. The combined balance of the Statutory Budget Reserve and Constitutional Budget Reserve was roughly $17 billion when the legislature elected in 2012 walked in the door. The balance will be less than $11 billion when the spending they authorized — and the Governor signed — in their two sessions is completed.
If I were a legislator, particularly if I were a legislative leader or someone who sat on one of the Finance Committees, I would regret the resulting record. I sure wouldn’t be claiming any credit for it.
Indeed, even the Governor’s traditional business allies are repulsed by the current state of affairs. In this year’s Alaska Business Report Card, the combined voices of the Alaska State Chamber of Commerce, the Alaska Support Industry Alliance, Prosperity Alaska and the Resource Development Council for Alaska had this to say about the Governor’s fiscal record:
Governor Parnell has been far less successful in trimming the size of state government and reducing its unsustainable unrestricted general fund spending. …the State’s fiscal cliff looms large. Alaska needs more leadership from the Governor on this very important strategic issue. We hope he will step up to that need with some significant vetoes in the FY2015 operating and capital budgets, together with a clear message explaining the need for them.
The Governor’s response? Zero vetoes. If this were one of the London tabloids, that response essentially would be translated into a headline that said “Parnell to Alaska’s Business Community [you know, the one’s that make the investments and will be the first in line to be assessed taxes when the fiscal gap hits]: Drop Dead.”
As the University of Alaska – Anchorage’s Institute of Social and Economic Research put it in 2013 and again in 2014 (in other words, under both ACES and SB 21), on its current path Alaska “does not have enough cash in reserves to avoid a severe fiscal crunch soon after 2023, and with that fiscal crisis will come an economic crash.”
That — that statement right there — is Sean Parnell’s (and unfortunately, the most recent Legislature’s) real fiscal record.