by Quinn Townsend and Vance Ginn
With revenue forecasts as rosy as this year’s have been, the legislature’s passage of a very large budget for fiscal year 2023 (FY 2023) comes as no surprise. At the first scent of additional revenue, legislators turned from clamoring for more statewide taxes — Yikes! — to spending over $8 billion in state funds (not including Permanent Fund Dividend payments).
In the end, officials plan to spend $8.63 billion in state funds, which is $2 billion above Alaska Policy Forum’s Responsible Alaska Budget (RAB) of $6.55 billion and 38% more than last year’s budget. The RAB represents a strong fiscal rule that sets a maximum spending amount for legislators. Abiding by this limit, $6.55 billion for FY 2023 would have prioritized the needs of Alaskans without excessively growing government.
Alaska needs to recover from the economic challenges of the last few years, even while continuing to recover from a decade of excessive government spending from 2004 to 2015. More widespread government spending makes the second problem worse while doing nothing to address the first.
Approximately 11% of the budgeted state funds are in the capital budget, which should be funding necessary infrastructure projects in the state, such as the Port of Anchorage and the Port of Nome. Unfortunately, the FY 2023 capital budget also spends on things such as scoreboards for hockey teams, diving boards for a corporation, and grants to a variety of nonprofit organizations, none of which have anything to do with the state’s physical capital.
On a positive note, $1.6 billion is budgeted for deposit into the Constitutional Budget Reserve (CBR), a rainy-day savings account.
Rather than showing fiscal restraint, legislators took the state’s additional revenue and ran. Moving forward, Alaska Policy Forum will continue to support an RAB that grows only by annual population growth and inflation, a meaningful constitutional spending limit, and fiscal restraint. The state must not fall into the same trap as during the oil boom years of the early 2010s, with high, unsustainable spending that ultimately resulted in a fiscal cliff. Legislators should spend state funds wisely, not on pet projects.
Alaskans deserve responsibility.
Vance Ginn, Ph.D., is the chief economist at Texas Public Policy Foundation in Austin, Texas and a Policy Fellow at Alaska Policy Forum. Ginn served as the associate director for economic policy at the White House’s Office of Management and Budget (OMB) during the Trump administration, 2019-20.