The FY 2016 Budget: Oops …

Fiscal CliffRemember last spring when the Alaska Legislature finally finished up the FY 2016 budget.

Yep, I do too.

The spending level authorized when they did?  $5.18 billion (see circled number below, line 40).

FY 2016 Fiscal Summary (1.23.2016)

Fast forward to the beginning of this year and the same FY 2o16 budget, signed, sealed and delivered only after so much conflict and effort last spring, has now grown to $5.39 billion (see circled number below at line 41), another $210 million or 4% higher than when enacted at the end of last session.

FY 2017 Fiscal Summary (1.23.2016)

In one fell swoop the intervening spending increases effectively have reversed 20% of the roughly $1 billion in year-on-year spending reductions from FY 2015 levels the Governor and Legislature claimed  to have achieved at the end of last year’s session.

What happened?

Well, the intervening special LNG session for one thing.  That added $144 million (line 33) and most of the $13 million in “Supplemental Appropriations” listed at line 20.

And the remaining $53 million?  Well, there is $35 million for “Community Revenue Sharing” (line 32, which was zeroed out in the original budget), a net $8 million increase in other “Agency Operations” and a $9 million increase in other “Statewide Obligations”.

All of that is somewhat understandable when considered individually and I, for one, believe that the added expenditures are important.  But again, the net effect is to raise overall FY 2016 spending by $200 million — not the direction (or level) in which the state budget should be headed in these times.

If the Governor and Legislature thought it was important to increase spending by $200 million in some areas, then they should have reduced spending elsewhere by the same amount to stay within the spending limits that many agreed were critically important when achieved at the end of last session.

In its February 2015 report, The State’s Operating Budget: Critical Crossroads, Choices, and Opportunities (at 21) Commonwealth North recommended as a procedural matter that the Legislature:

Establish a Joint Ways and Means Committee tasked with introduction of a resolution at the start of each session that establishes the overall amount of revenue that will be available for the following fiscal year’s budget, including the amount that will come from savings. The Legislature then takes action on such a resolution within the first two weeks of the session.

The purpose of the recommendation was to set a spending cap at the beginning of each legislative session to guide the appropriations process and avoid the sort of piecemeal appropriations that, in the past, had resulted in excess spending.

The Legislature has not yet adopted the recommendation.  The result is now yet another year of — “oops, we spent more.”

Whether it is that or another way, in these times of “living within our means” especially, the Legislature and Governor need to develop a procedure which sets a hard spending cap based on what the state can afford to spend for each year — and then live within it.  Want to increase spending in some category along the way, then offsetting reductions will need to be taken elsewhere.

Businesses don’t tolerate executives backsliding 20% on previously agreed reduction targets.  Neither should — or will — voters.

The procedures recommended by Commonwealth North or their equivalent should be adopted as part of any fiscal reform enacted this year.  Going forward, the state cannot afford any more “oops” moments.

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