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Commissioner: State in good fiscal health — for now

Posted: November 24, 2011 - 11:07am  |  Updated: November 27, 2011 - 4:07pm

Alaska’s fiscal picture is a pretty one compared with most states. But that won’t be the case if expenditures continue to rise and oil production remains on the decline, said Alaska Department of Administration Commissioner Becky Hultberg during a meeting of the Chugiak-Eagle River Chamber of Commerce on Nov. 16 at the Bear Mountain Grill in Eagle River.

“We have to make some difficult decisions,” Hultberg told the chamber.

During her presentation, Hultberg said the state’s operating budget has doubled — from $4 billion to $8 billion — in just the past decade.

“We cannot sustain that rate of growth,” Hultberg said.

Health care and retirement costs are a big part of that increase, she said. Since 2001, state spending on health care has risen at a rate of 9.4 percent a year, while the state is currently on the hook for $11 billion in pension liabilities.

“Every part of the budget has grown in the last decade,” she said.

So far, the state has been able to keep its head above water because of the high price of oil. But without future sources of revenue, that might not be the case, she said.

“We need a strong and healthy revenue stream,” she said.

As of right now, she said Alaska’s fiscal health is strong, with a budget surplus and plenty of money in the bank. It’s a position many states Outside aren’t as fortunate to enjoy, she said.

“We have a healthy balance sheet,” she said. “We’re the envy of other states.”

But Hultberg also pointed out that Alaska’s oil production continues to decline at a rate of about 5 percent a year. If current trends of increasing spending and decreasing oil production continue, she said Alaska could be in for a rude awakening. On a graph, Hultberg pointed to two lines. One, representing spending, shot upward. The other, showing revenue from oil production, went in the opposite direction.

“If nothing changes, revenue and expenses crosses in the next decade,” she said.

In order to avoid running at a deficit in the very near future, Hultberg said measures must be taken now — both by the private sector and government — to reign in spending and locate new revenue streams.

“We all have a role in coming to the table to help solve that problem,” she said.

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