Caution urged with oil revenue surplus

What others say

Posted: Thursday, October 27, 2005

Commonwealth North hosted a forum Wednesday to discuss what Alaska should do with the big surplus pouring into the state treasury, thanks to $60-a-barrel oil. UAA economist Scott Goldsmith had some good advice for Alaskans and their political leaders.

''Be cautious,'' he said. ''You don't know what tomorrow will bring.''

The surplus that looks so juicy now, with oil selling at $60 a barrel, shrinks to more modest size if oil averages ''only'' $50 a barrel, Mr. Goldsmith noted. At that price, Alaska could pocket up to an extra $300 million this year and again next year. Nice as that extra money is, $300 million a year wouldn't cover a big jump over current spending levels, he said. A maintenance-level budget in 2007 will cost about $3 billion of general funds. In future years, as costs continue to escalate for big-ticket programs like K-12 education and Medicaid, the cushion supplied by $50 a barrel oil looks smaller and smaller.

State Rep. Norm Rokeberg sounded a similar warning. He rattled off a plausible list of added expenses — K-12 education, the university, Medicaid, public employee and teacher retirement shortfalls, increased fuel costs, routine supplemental appropriations for unexpected expenses — and noted that it would take an oil price of about $52.50 to fund that level of spending.

Mr. Goldsmith urged state lawmakers to save the surplus. His call was generally echoed by others on Commonwealth North's panel of community leaders and elected officials.

Exactly how the state should save the money isn't a simple question, however. If left unspent, it automatically gets swept into the Constitutional Budget Reserve Fund. That reserve is supposed to buffer the budget against swings in oil prices — collecting extra money when oil prices are high and filling the gap when prices are low.

But Rep. Rokeberg and his fellow Republicans who run the Legislature are not big fans of the reserve fund. It generally takes a three-quarters vote to spend money from the account. That means Republicans have to cut deals with Democrats to get the necessary votes. He wants to end the supermajority vote requirement.

Fine, said panelist Gretchen Guess, a Democratic state senator from Anchorage. She said she was tired of seeing Demo-crats blamed for Republican overspending. She endorsed saving the surplus, but like Rep. Rokeberg she noted a number of good causes that will be hard to refuse with extra money around. Her list included honey-bucket relief for communities without sanitation, revenue sharing for the state's financially struggling small communities, and the growing service needs of the burgeoning Mat-Su Borough.

So, amid the talk about saving the surplus, there's a lot of talk about spending needs, along with disputes about where to stash any saved money.

These are not good signs. The best we can hope for with the surplus is that we don't waste too much of it. ...

Banker Marc Langland made the strongest pitch for more decisive, visionary action. He wants Alaska to stabilize the state's long-term finances once and for all. He noted ... Alaska is still vulnerable to a drastic oil price drop. ... (its) ''herky jerky system'' of budgeting, driven totally by swings in oil prices, is ''insane.''

With $60-a-barrel oil and good prospects for a lucrative natural gas pipeline, we have the time, Mr. Langland said. We have the assets. What we need is the political will to make the politicians come up with a long-term financial plan we can live with.

He's right about that.

— Anchorage Daily News,

Oct. 16

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