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Biggest Alaska budget shocker? It's actually shrinking

  • Author: Dermot Cole
    | Opinion
  • Updated: September 30, 2016
  • Published January 23, 2016

JUNEAU — When adjusted for inflation and population growth, per capita Alaska state government spending for day-to-day agency operations today is about as low as it's been over the past 40 years.

Alaskans never look at the budget this way, but it's a vital piece of evidence if we are ever to find consensus on the proper size and shape of government.

"Once you take inflation and population growth into account, the operating budget has not grown. It's shrinking," David Teal, director of the Legislative Finance Division, told the House Finance Committee Wednesday.

A large contingent of Republican legislators say government must be "right-sized," though they won't or can't define what it means to make things right or what exactly they find wrong.

The Democrats, for the most part, defend the current size and scope of government spending, though they are equally hesitant to suggest anything that will be unpopular with their constituents—such as a reduction in the Permanent Fund dividend.

It is this reluctance to offend from both sides — at the risk of losing support at the polls later this year — that has to be overcome to keep the Alaska economy off the rocks. It's unfortunate for all concerned that the alternatives are unpopular but necessary.

Republicans believe that until Alaskans complain all the time about budget cuts, there must be room to make more reductions in state spending. Sen. Pete Kelly, co-chairman of the Senate Finance Committee, said the $800 million in cuts approved last summer have produced no significant response from the public.

"That tells me it's pretty fat," he said. "We gave them quite a bit less and nothing happened. Nothing significant."

What's really significant is that it's too soon to make that claim. The cuts haven't hit the economy, so the public doesn't know about them.

While more than 600 jobs have been cut in state government over the past year, those are spread statewide in many offices and communities. More significantly, an immense backlog of capital budget construction projects —estimated to be more than $1 billion — have yet to be built.

The money continues to flow and people are working, surviving on appropriations from yesteryear when oil was more than $100 a barrel. But those days are gone and the capital budget is down by more than 90 percent.

"That backlog of capital projects makes it so that no one really knows you've cut the budget. But they will know as soon as that backlog vanishes," Teal told the House committee.

The public is not clued in to the complicated details for many reasons, but with a slowdown in the offing, we need to know the full picture about state spending past and present.

If we ignore inflation, as suggested by North Pole Rep. Tammie Wilson, a member of the finance committee, we won't be fooling anyone but ourselves.

Regarding inflation, she said to Teal, "You're some kind of mathematician who believes in that," and said it would be easier to explain the situation to her constituents if only population growth was included in his analysis of the state budget history. Yes, it would be easier to explain. And impossible to justify.

The population has about doubled over 40 years and a 1975 dollar is now worth more than $4, so the overall totals are way up.

Add to all this our inability to make sense of numbers with nine zeros and we have a public awareness gap that rivals the fiscal gap.

A recent poll by the Rasmuson Foundation showed that few Alaskans understand that the budget was cut by $819 million last year, about $477 million of that in the capital budget. And while large percentages of people favored continued budget cuts, 41 percent said they had no idea what to cut and there was no broad agreement by the other 59 percent on specifics.

"It becomes an issue of what people think," Teal said. "They're very strongly opinionated. But I'm not absolutely certain they know the facts."

"And what would you expect people to tell you to do to the budget when they think the budget is growing like crazy? If you look at the numbers, it is not growing like crazy," he said.

The total general fund budget was $7.8 billion in 2013. It is now down by $2.3 billion, about 30 percent, largely because of cuts to the capital budget.

Still, the public believes the budget is growing, which adds to the confusion at a time when the state's traditional revenue sources are below $2 billion a year and the budget is $5 billion a year, a dangerous situation that can't continue.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com.

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