Earlier this month I announced that I intend to spend up to $200,000 this coming fall in certain key legislative races. The reason I am doing that is simple. Two years ago, the Institute of Social and Economic Research, the state’s best economic think tank, said this about Alaska’s direction: “Right now, the state is on a path it can’t sustain. ... Reasonable assumptions ... suggest we do 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.”
ISER warned that if current trends continued, Alaskans would be faced in the near future with “broad based (income or sales) taxes” and the diversion of a portion of the earnings of the Permanent Fund to help fund state government just to maintain a minimal level of services. Many elected in the 2012 elections said they were committed to doing something about that situation. Shortly after the election, in fact, the newly elected Senate majority listed “sustainable capital and operating budgets for current and future generations” as one of its “Top Three Areas of Focus.”
But they didn’t follow through. Instead, as a body those elected in 2012 have allowed the situation to become worse. Since that time the Legislature has enacted and the governor signed back-to-back the two largest deficit budgets in Alaska’s history. In order to fund those, and other things, during the same period the state’s savings have fallen by over $6 billion, or over a third from their 2012 balance.
According to analyses by the state Legislative Finance Division, at its current pace the state is now on track to run through the remainder of its savings by the end of the decade. SB 21 doesn’t change that. While better than under ACES, even the most rosy predictions made by the administration show that anticipated increases in future revenue levels under SB 21 will fall far short of covering even current spending levels.
It doesn’t have to be this way. At the same time as it issued its initial warning, ISER offered a solution. “What can the state do to avoid a major fiscal and economic crisis? The answer is to save more and restrict the rate of spending growth.”
ISER said that if the state reduced current spending to a sustainable level and invested the remainder, earnings from those investments in future years would be sufficient to maintain the same spending level, adjusted for inflation and population growth, for decades ahead. In short, by saving and investing some of its current revenues, the state could turn a non-renewable resource -- oil -- into a sustainable and renewable financial resource for both current and future Alaska generations.
But to achieve that takes legislators who have vision and are willing to make the choices necessary to build that future for Alaska. Instead, we have a legislature that in many respects looks like the Congress that existed in the mid-2000s. As the Wall Street Journal would later say, “It isn't easy to spend so much money so egregiously that even Nancy Pelosi could campaign as a relative fiscal conservative, but the Tom DeLay Republicans managed the feat in 2006.”
Rather than sit around and continue to complain, I am going to put some of my money where my mouth is in an effort to change that dynamic going forward. This week I am sending out questionnaires to the general election candidates to identify their positions on these issues. Following that, I have commissioned a poll to target key races where my efforts will make a difference. I will decide on and announce those races by Labor Day and intensify the effort from there.
I have achieved some success in my life and its time to start paying some of that back in a meaningful way. Alaska’s future is at stake. The effort to ensure that it remains bright is a good place to start.
Brad Keithley is president of Keithley Consulting LLC, an Alaska-based and focused oil, gas and fiscal policy consultancy, and founder of Alaskans for a Sustainable Budget.
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