This op-ed by Alaska Policy Forum board member, Jesse Sumner, was originally published by the Anchorage Daily News on July 11, 2021.
After two special sessions to create a smart and functional budget, one would think Alaska legislators would have used it to their advantage and created a budget that works for Alaskans.
Instead, the end result was an overinflated budget that was haphazardly forced through to avoid a government shutdown, puts economic pressure on Alaska’s fiscal future, and does not create a viable path forward for the Great Land.
A sustainable Alaska budget would use population growth plus inflation to find the maximum threshold on state appropriations.
In order to create a responsible Alaska budget for the upcoming fiscal year, the state Legislature should have appropriated no more than $6.18 billion — a $2.02 billion discrepancy from its first proposal of $8.2 billion.
The budget that finally passed is better than the first, as it received cuts of $1.07 billion, however, it still sells Alaskans short with a discrepancy of $957 million from the aforementioned responsible Alaska budget amount. The $7.13 billion price tag is still too high to stabilize and maintain Alaska’s private-sector economy.
The best way to address the discrepancy is with a revised constitutional spending cap, which year after year the Legislature fails to act upon.
Without a formally revised constitutional spending cap that is voted on and approved by the people, Alaska’s financial future will continue to be at the mercy of the Legislature and the whims of those in power. An improved constitutional spending cap will help ensure the values of the Legislature stay in line with the values of the people.
It would also help at the local government level: A better constitutional cap on expenditures would remove budgetary uncertainty for our municipalities and boroughs. When state budget reductions are carried out sporadically, local governments are incentivized to tax more in order to build contingency reserves.
For the past few years, Alaska policymakers have been making claims of “40% spending cuts.” That claim may be great for campaign ads, but it’s a deceiving sliver of the big picture. Recent research shows that actual Alaska state spending reductions since 2013 are closer to 18.5%, and more a result of fancy accounting than meaningful legislative action.
Smoke and mirrors accounting may benefit the Legislature during campaign season, but it does nothing for Alaskans or their futures.
While the current budget has identified temporary revenue sources, long-term effects of overspending could prove harmful to the Last Frontier’s economic health including the further expansion of the state government, contraction of our private-sector economy, or further diminished state savings accounts. Of course, Alaskans are already being proposed as the source for funding the budget discrepancy via personal taxes.
The best option for the state legislature to stabilize Alaska’s economy is to allow Alaskans to vote on a more serious constitutional spending cap and in the meantime, make the budget cuts necessary to stay under the cap.
The Last Frontier’s history over the past two decades has proven time and time again that we cannot spend or tax our way into prosperity. Hard decisions need to be made to shape a more secure fiscal future for our state.
If Alaska residents, businesses, and families are expected to create and follow a smart, priority-based budget, our state government should be held to the same standard.
Our leaders are not supposed to be creating a budget for themselves and their special projects. Our government is supposed to be creating a budget for the people of Alaska. The first budget the state Legislature proposed crashed and burned because they did not put the people of Alaska first, and instead prioritized their own self-interest and re-election campaigns.
The second budget is only marginally better. Neither of these budgets is responsible.
Alaska deserves better. We want to see our businesses flourish. We want to see our opportunities grow. Unless state government gets spending in check, the only thing Alaskans can expect to see is taxes, instability and an uncertain economic future.
Jesse Sumner is a lifelong resident of the Mat-Su Borough, a business owner, and a board member of Alaska Policy Forum.