It took 140 days, but Alaska will have a budget for the year ahead. In a long-delayed compromise that provided the votes for a draw on the state’s Constitutional Budget Reserve, the Legislature passed an operating budget totaling roughly $5.4 billion, a cut of $800 million from last year. While there’s still a long way to go, the Legislature made progress in slimming the state’s budget this year, and it’s good that the majority and minority caucuses were able to compromise and avoid a government shutdown. Passing a state budget seem a low bar to clear, but it’s the fundamental task assigned to the legislative branch, and the effects if the Legislature had not done so would have been far-reaching and disastrous for Alaskans.
The speed with which the budget compromise came together was surprising given the abject failure of earlier efforts. Gov. Bill Walker sent the Legislature to special session when several major items — including the operating budget — were left unfinished in April. The House majority and minority caucuses spent weeks during the two special sessions that followed assembling a fragile compromise, only to have it rejected outright by Senate Finance Committee chairman Sen. Pete Kelly, R-Fairbanks, who stripped out many of the compromise items from the budget the Senate later passed.
A conference committee was assigned to iron out the differences between the House and Senate budgets, and it appears the bulk of movement on the budget after that committee formed took place behind the scenes. With only 20 days before the state was due to lay off about 10,000 employees, a move that would have caused economic chaos, the sides reached agreement and passed a budget that looked largely like the compromise the House caucuses had come up with in the first place.
While there are various items throughout the budget with which one might find fault depending on individual priorities and political philosophy, there are two big positives in the Legislature’s passage of the budget. The first is that the huge negative impact that would have resulted if no budget were in place by the start of the next fiscal year will be avoided. The second is that the method the Legislature chose to fund that budget — drawing on the state’s Constitutional Budget Reserve rather than making an arcane shuffle involving the Alaska Permanent Fund earnings reserve — is by far the most sensible option that was available. The scorched-earth approach of transferring nearly all of the money out of the permanent fund earnings reserve would have left the state with far less flexibility regarding future deficits and could have endangered residents’ annual dividends.
So the Legislature has done its primary job for the year, and while the $800 million in cuts made from last year’s state operating budget will fall heavily on the state and its residents, for the most part the body did what it could to spare residents from outsize impacts. That task will be nowhere near as easy in future years as more avenues to reduce state spending are sought. The state still has a $3 billion budget gap, which can only be closed a small fraction by additional cuts without great harm to state services and the Alaskans who depend on them.
In recognition of this reality, it’s time to begin discussion of revenue options to make Alaska’s budget sustainable again. This won’t be an easy discussion — few people want to have more money withheld from their paycheck, face higher prices on groceries and household items or acknowledge that the permanent fund dividend may not last forever. And care must be taken to ensure the revenue solutions enacted don’t disproportionately discourage residents and businesses from investing in Alaska and its future. But it’s a discussion that must start now and must involve all Alaskans, so that when the Legislature returns to session next year, they won’t be starting from square one.
— Fairbanks Daily News-Miner,