Save the money

If North Slope crude oil prices now hovering near $80 per barrel remain at that level, or even increase, Alaska could be within striking distance of closing its chronic budget gap, perhaps by next year.

The added revenue, along with the Legislature’s decision to use Permanent Fund earnings to help pay for government at the expense of dividend checks, puts the state closer to bridging the gap.

We are left to wonder whether the Legislature, as the fiscal pressure is alleviated, will get the state’s spending under control or whether it will continue to spend as if there is no tomorrow while telling Alaskans the government cannot be cut further.

We correctly predicted the Legislature would do nothing of note about Alaska’s fiscal crisis until the state’s reserves were almost gone. Here is another prediction. With more money to spend, the Legislature will simply spend more money, again growing government.

With oil prices rebounding, and more money for lawmakers to spend, it only will be a matter of time before Alaska is back in a fiscal mess.

Instead of spending a penny more than it has to, the Legislature should use any new revenues to begin rebuilding the state’s reserves.

If oil prices go up, they most certainly will go down. It would be nice to again have a cushion.

 

2 Responses to Save the money

  1. Randy S Griffin Fairbanks Alaska July 8, 2018 at 7:44 am

    I will be very glad when Alaska closes its budget gap and gets some surplus money. That will be my signal that I can start taking the Perm Fund dividend payments again. I have not gotten a cent of PFD money since 2014 due to the budget deficit.

    I am very motivated to see the budget trimmed. However, even though my PFD payment is dependent on trimming expenditures, I’m not going to be automatically against state spending on anything. Some capital budget expenditures may be good investments for Alaska’s future.

    I think all Alaskans are now motivated to see the budget trimmed since we are now in the era where the legislature now sets the PFD amount based on financial circumstances. If the PFD payout amount returns to being determined by the old fixed static formula, then motivation amongst the majority of people to trim the budget will mostly evaporate, and a push to impose a state income tax will magnify.

    Reply
  2. Pete Brown July 9, 2018 at 9:41 am

    The proper application of any windfall surplus should be to pay down some of the State’s roughly $7 billion in unfunded pension liability. We have the highest per capita unfunded pension liability in the U.S. and virtually all politicians in the State are ignoring it.

    That $7 B represents a real claim on our assets and cash flow, which if not addressed, will ultimately present a huge bill. At that point in this very artificial crisis, the Permanent Fund will be tapped to pay these liabilities off, making the current raid on the PFD a gnat bite in comparison.

    Reply

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