Budget Styles of the Solvent and Publicly Accountable
Robin Leach built the best known part of his career sending “champagne wishes and caviar dreams” to viewers whose budgets allowed for toasting the new year with Miller High Life and splurging on the name-brand potato chips.
Alaska budget writers should be able to put healthy, balanced meals on the table when we get to work this session, but caviar is clearly off the menu. And looking down the road, there isn’t much in the way of canned food and dry goods in the pantry for the next time things get lean—you can forget champagne.
Let's dig in to the general fund budget a bit:
We'll probably get about $1.8 billion dollars from Alaska's oil this year. Prices have been quite good.
We take in about $500 million from the state tax on the largest corporations (mostly those traded on the stock exchange, plus a few others like banks and air carriers.)
The sustainable draw on the Permanent Fund will be $3.5 billion.
All together, with a couple hundred million dollars in alcohol, tobacco, and insurance tax revenue, that's a smidge over $6 billion coming in to the general fund.
We spend about $4.7 billion on running the government day-to-day. That's been basically flat for years now.
The capital budget varies a lot, but this year it's about $350 million in general funds.
Then there's many Alaskans' favorite government program, the PFD. Every thousand dollars we put on the check costs a smidge under $700 million statewide. So October's $1300 PFD ran Alaskans $880 million.
All together, that's about $5.9 billion in spending.
Add, subtract, and carry the one, and you'll see that as long as the price of oil doesn't crater, we'll have a dollop of savings at the end of June. But if we know anything about the price of oil, it's that it won't hold still.
When that's happened in the past, we've gone to savings. Today there's a little over $2.5 billion in the Constitutional Budget Reserve, so that option would get us through a year or two of moderately low oil prices. But what happens if we have both low oil and a problem making a withdrawal from the Permanent Fund?
In recent years, the spendable part of the fund—the Earnings Reserve—has gone down a lot. Much of that was because we moved $8 billion into the constitutionally-protected principal so it couldn't be spent on massive PFD checks. But the rest is due to a few years of lackluster earnings at the same time we've drawn steadily to pay for public services and moderate PFDs.
It seems unlikely the Earnings Reserve will go to zero. Markets rebound, investments turn over, and rent checks come in. But it's far from impossible.
What will keep us from having to liquidate our valuables to pay the bills like Willie Nelson in the 1990's? Certainly another stable revenue source would do it, but that's as unlikely in an election year as Jay-Z flying coach to the Mediterranean. Instead, look for legislators to think up short-term patches like pausing inflation-proofing the Fund or building our deferred maintenance backlogs on schools and state buildings to muddle through.
Those short-term approaches cost more in the long run. And they shouldn't be the Alaska way. They certainly don't have to be. We can protect the Permanent Fund, educate the next generation, and keep our communities safe while still having the lowest tax burden in the country. That's what I'm working toward in the second session of the 33d Alaska Legislature.
While Dom Perignon and Petrossian Beluga remain firmly out of reach, we should be able to balance Alaska's financial picture enough to eat healthy and stay out of the food bank line. So in my best Robin Leach British accent: For 2024, I'm sending you those Alaskan Amber wishes and herring egg salad dreams.
