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It's time for Alaska to consider using its budget options

Posted: Sunday, March 16, 2003

"State budgets are under siege. The faltering national economy, declines in the stock market, contractions in manufacturing and high-tech sectors and soaring health costs have combined to undermine the stability of state budgets."

--From a National Conference of State Legislatures report,

Feb. 4, 2003

Alaska has plenty of company when it comes to a bleak budget outlook.

An Associated Press story last week outlined some of the penny-pinching measures some states are taking as they seek to close the gap between revenue and spending. In Kentucky and Missouri, light bulbs are being unscrewed. In Oregon, color printing and new magazine subscriptions have been banned. Kansas is dropping its gold embossed seal from stationary and business cards and switching to plain paper.

Of course, those are largely symbolic gestures aimed at walking the talk of tight budgets. But many of those gestures have been accompanied by much more painful measures -- including program cuts and employee layoffs.

According to The Wall Street Journal, just three states -- Arkansas, New Mexico and Wyoming -- will not have a budget deficit during the 2004 fiscal year.

A February report from National Conference of State Legislatures revealed:

Two-thirds of the states must reduce their budgets by nearly $26 billion between now and June 30, when the current fiscal year ends in most states.

States are facing a minimum $68.5 billion budget shortfall for the next fiscal year -- with 33 states estimating budget gaps in excess of 5 percent and 18 of those facing gaps above 10 percent.

Thirteen states have cut Medicaid spending, 12 have cut higher education, nine have cut elementary and secondary education, nine have cut corrections spending, nine have nixed employee travel, and nine have laid off employees.

In the current legislative sessions, at least 24 states report tax increase proposals have been introduced; at least 14 states are considering higher taxes on cigarettes and six are considering higher alcohol taxes.

States are using rainy day funds, tapping other state funds, delaying capital projects and cutting spending to balance their budgets.

There's a curious difference between Alaska and the other 49 states, however: None of the rest of them have a permanent fund account that, as of last week, amounted to $22,348,900,000.

In case you missed it, that's $22-plus billion.

Earlier this month when Gov. Frank Murkowski laid out his budget plan that included $55 million in spending cuts, the elimination of 21 programs and the addition of taxes, or user fees as the governor likes to call them, a hue and cry was heard from all quarters -- including Republicans.

And it was clear that those Alaskans who had hoped the new governor had a magic bullet -- or hidden oil field -- to close the state's budget gap were in for a rude awakening.

Most disturbing in the governor's budget were the proposed cuts to schools. While Murkowski 's proposal fully funds the foundation formula, which provides money to schools, it cuts the amount the state reimburses districts for transportation by $10.7 million, it reduces certain grants by $10 million, it cuts school debt reimbursement by $6.6 million and eliminates the community schools program by $500,000 -- for a total of nearly $28 million.

Those who have followed the recent school budget talks as well as contract negotiations realize the Kenai Peninsula Borough School District doesn't have any spare change laying around. The cuts the governor has proposed will hurt education here and across the state.

Alaska, however, has a way to cope with its deficit that other states don't have. It could limit the deposits to the permanent fund to the 25 percent of the state's oil revenues as required by the state's Constitution.

House Bill 11, sponsored by Rep. Norman Rokeberg, R-Anchorage, would do just that. It would switch about $54 million from the fund to the state treasury and repeal a 1980 measure that gives more to the fund. The state Department of Revenue estimates the bill would result in a cut to dividends of about $20 per Alaskan by 2012.

And while it will be characterized as such, we can only echo Rokeberg's sentiments: This is not a raid on the permanent fund or on Alaskans' dividend checks.

The move will not solve all Alaska's budget problems, but it could stave off cuts to the most important item in the budget: education.

The state's education system is the foundation for the future. It's not the place where Alaskans should pinch pennies.

When it comes to solving its budget crisis, Alaska is in an enviable position. It has options that other states don't have. In fact, we suspect there's not a state in the union that wouldn't want to trade its budget problems for ours. And we suspect most would laugh at the notion that we think we have a problem.



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