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Sequestration fears focus lawmakers on Alaska's own fiscal imbalance

Pat Forgey
Aaron Jansen illustration

Oil industry advocates claim Alaska gets 90 percent of its budget from oil revenues, but concerns about sequestration - set to take effect March 1 unless Congress acts - have shed light on how state income really arrives. According to the Alaska Division of Finance:

  • 70 percent of the state's fiscal pie - not 90 percent - comes from the oil patch;
  • 20 percent of state spending arrives from the Feds;
  • 10 percent comes from various other sources.

In 2012, the U.S. government spent $2.5 billion in Alaska, enough to prompt hand-wringing among state legislators.

"Frankly, sequestration is far more impactful than BRAC," the Base Realignment and Closure Commission, said Alaska House Finance Committee co-chairman Bill Stoltze, R-Chugiak, one of the Legislature's budgetary leaders. "And (it) certainly has much more momentum."

The oft-repeated 90 percent oil and gas myth relies in part on advertising and public relations campaigns by oil industry cheerleaders and advocates -- the Alaska Oil and Gas AssociationMake Alaska Competitive Coalition (MACC) and the Resource Development Council -- and has been perpetuated for years now. Lawmakers, the media, supporters and opponents of Alaska's oil industry cite it without credit.

In fact, the people claiming 90 percent are referring to oil’s portion of the state's so-called unrestricted general fund. The amount of money Alaska gets from the federal government is rarely discussed, but it’s at the core of the state's love-hate relationship with Washington, D.C. Alaska often tops lists like this one charting states that receive the most federal money related to taxes paid.

Just a few years ago, then-Alaska Gov. Sarah Palin faced a firestorm when she said she wouldn't accept some federal stimulus money. She backed off most of those statements, but when she vetoed a final $28 million in 2009, the Alaska Legislature quickly called itself into special session to override the veto.

Now, the federal budget debate is threatening Alaska with funding cuts, both direct and indirect, once again.

"It's going to be real tough for our state if we have that sequestration take out federal funding in some areas," said Rep. Steve Thompson, R-Fairbanks, a member of the House Finance Committee.

Previously, lawmakers have been told that direct cuts to federal spending in Alaska this year would likely be small, about $37 million for FY2013. But lawmakers on Friday were concerned about the possibility of spending cuts at other agencies, on down to the municipal level -- and the prospect that the state may be asked to replace the lost federal dollars.

"We're going to have to look at programs. Are we going to try to backfill that shortfall" for Alaskan communities, Thompson asked, "If we don't do that it will have an impact on our people."

A 2011 Government Accountability Office report found that Alaska got $4.99 from federal transportation spending for every dollar paid in, the highest in the nation. No other state got more than $3 for each $1 paid by its residents.

House Speaker Mike Chenault, R-Nikiski, said that one option for dealing with the looming deadline was for Congress to simply delay hard decisions about U.S. spending and budget-cutting, as has happened over and over.

Sequestration was never supposed to happen; it was to be the inconceivable consequence that compelled a congressional "supercommittee" to plot a path out of debt for the federal government. The supercommittee failed spectacularly. Sequestration was to take effect on Jan. 2, but was delayed until March 1 in a deal brokered to raise the federal debt ceiling.

Chenault expects yet another extension from Congress to delay the cuts. "I think you are going to see them punt again," he said.

Contact Pat Forgey at pat(at)alaskadispatch.com