EDITORIAL: Don’t let state leaders off the hook for their budget fantasies

“Be a goldfish,” fictional soccer coach Ted Lasso counsels his players in the TV show that bears his name. The lesson, Lasso says, is that goldfish are the happiest animals in the world because of their purported 10-second memory, which allows them to quickly forget negative events — a belief science has shown to be an old wives’ tale, but it makes a good story.

If Lasso had met Alaska leaders asked to recall their revenue projections at budget time, he might have used them in the analogy instead. Unfortunately for the rest of us, lawmakers’ continual optimism that is rarely borne out in reality isn’t something forgetting about it will fix.

A year ago, we decried the governor’s-race politics that resulted in all three major candidates making big Permanent Fund dividend promises that ran the risk of major deficit spending if rosy oil revenue forecasts didn’t pan out. Two months later, we castigated proponents of a $5,500 mega-PFD, led by Sen. Mike Shower, which risked creating a deficit that could have burned through all of Alaska’s non-Permanent Fund savings in service of one big check. “If oil prices average less than $74 per barrel for the next fiscal year, as they have for each of the past seven fiscal years,” we wrote at the time, “Alaska will burn through every penny of its remaining savings to fund their budget, and the only account left will be the Permanent Fund.”

Fortunately for Alaskans, slightly cooler heads prevailed in the budget fight, but the result was still an irresponsibly large $3,284 check that risked a substantial deficit. No matter, the mega-PFD crowd said, oil prices will surely stay high and everything will work out.

As it happened, oil prices in the interim for the first half of the fiscal year were fairly rosy, averaging about $90 per barrel from July to December 2022. But since then, prices have been in the $75-80 range, and in the past week, they’ve slumped further. As a result, Alaska is now nearly a quarter-billion dollars short of a balanced budget for the current fiscal year — the one they wrote a year ago when oil prices were temporarily higher. And in order to fund one of the largest operating budgets in state history, legislators are poised to make a $246 million draw on the Constitutional Budget Reserve to cover the current deficit, as well as a further draw of as much as $115 million for unanticipated spending needs that weren’t even included in last year’s budget. That’s more than 15% of the entire account — and that’s not considering the budget that’s being hammered out right now for the new fiscal year that starts in July.

So remember this reality check as the legislative session winds on, as legislators insist we can have our cake and eat it, too: Over and over, Alaska’s oil price-dependent history has shown us that if we make unrealistic revenue assumptions, the roller coaster of resource prices makes us pay the price. And it’s our children who pay most, as deficit spending drains the savings accounts that protect the Permanent Fund — which will be our primary revenue generator in years to come and the only bulwark between us and the high individual taxes paid by many Lower 48 states. As the oil price fairy flies into and out of Juneau, the conflict between big one-time spending in the present and planning for the future will always require discipline and mature decision-making. That need is especially acute this year, as it’s becoming increasingly clear that the fundamental state budget struggle will be between increased funding for education and increased funding for the PFD.

Don’t let our leaders check their self-proclaimed fiscal conservatism at the State Capitol door. Call them out when they insist the oil price fairy will allow us to have both robust services and mega-PFDs. Remind the happy goldfish what they said about our fiscal position a year ago — and the hundreds of millions of dollars we’re having to pull from savings as a result.

Anchorage Daily News editorial board

Editorial opinions are by the editorial board, which welcomes responses from readers. Board members are ADN President Ryan Binkley, Publisher Andy Pennington and Opinion Editor Tom Hewitt. The board operates independently from the ADN newsroom. To submit feedback, a letter or longer commentary for consideration, email commentary@adn.com.