state of alaska · state of alaska office of management and budget department of revenue department...

State of AlaskaOffice of Management and BudgetDepartment of RevenueDepartment of Law

Understanding Alaska’s Fiscal Situation

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Revenues Expenditures

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Alaska Revenue and Spending History

1975: Oil money starts flowing…

…State government starts growing

1987 – 2006: 20 years of fairly stable revenues by today’s standard…

…20 years of flat spending

“Please give us just one more oil boom. We promise not to…”

2006 - 2014: Our prayers are answered!

“Uh, …Here’s the thing…”

That’s an average of 15% budget growth per year!

2014: Oil prices crash…

…but budget cuts did not match

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$2 Billio

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Source: Legislative Finance http://www.legfin.state.ak.us/

http://www.legfin.state.ak.us/

What if the Proposed Spending Cap Passed 20 Years Ago?

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CurrentConstitutionalLimit

Actual spending subject to limit

Proposed limit

This adds up to $29 billion (money that could not have been spent if proposed limit was in place)

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We would have spent at least $29 billion less

Source: Ed King, Chief Economist, Department of Revenue

With Proposed Spending Limit* Current Situation

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What if the Proposed Spending Cap Passed 20 Years Ago?

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Principal ERA CBR

*The amendment limits the Balance of the CBR to one year’s spending

We would be having very different conversations

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Principal ERA CBR

FY20 PFD = $3,000/personFY20 POMV = $2.9 Billion

FY20 PFD = $6,400/personFY20 POMV = $6.2 Billion


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ERA Balance UGF Revenues Allowed Transfer to GF Taxes PFD Excess Savings Draw

Status Quo Budgeting

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ERA Balance

PFDs run out Turn to ad hoc draws

Until the ERA is empty

And then taxes are the only option

Small PFD for now

No PFD, No Savings, and No good options for future Alaskans


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ERA Balance UGF Revenues Allowed Transfer to GF Excess Savings Draw PFD

Where does Governor Dunleavy’s plan lead?

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ERA Balance

PFD is protected

25 years of balanced budgets while following

existing state laws

The next generation will have the assets to deal

with future issues

No Taxes Needed

Full PFDs, Balanced Budgets, and a Bright Future

Budget growth kept in check


Use PFDs to Balance Governor’s Plan

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PFD Amounts Under Alternative Plans

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Alaska Economic Trends: GDP

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Historical Revenue & Operating Cost: Alaska Marine Highway System

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AMHS Fare Box Recovery Rate 1987-2018

Revenue Operating Cost Recovery Rate

Source: Alaska Department of Transportation and Public Facilities, 2019

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University of Alaska Spending and Outcomes

U.S.--$7,642/student Alaska--$16,391/student

Outcomes:

Source: State Higher Education Executive Officers Association and http://collegeresults.org/

11Source: Analysis by Evergreen Economics of data provided by the Medicaid Budget Group

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Alaska Grade 4 Reading Proficiency Alaska Inflation Adjusted State Aid

Education Spending and Outcomes

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Source: Alaska Department of Education and Early Development

Why Governor Dunleavy’s Plan?

• The cost of doing nothing is too high

• Without controls, the government always grows

• Without protection, the PFD will go away

• Without a seat at the table, taxes are coming

• How do we accomplish these goals?

•Constitutional Amendments!

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State of AlaskaOffice of Management and BudgetDepartment of RevenueDepartment of Law

Constitutional Amendments

Three constitutional amendments were introduced to provide sustainability, predictability, and affordability for Alaska:

1. Set an annual spending and savings rule to keep expenditures in line and not allow spending to increase when revenues are high

2. Require a vote of the people before broad-based taxes can be implemented

3. Constitutionally enshrine the PFD – Alaska is an owner state

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Governor’s Constitutional Amendments

1) Appropriation Limit (SJR6/HJR5):Caps Spending at a Sustainable Level

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• The current constitutional spending limit has grown to $10 Billion –clearly ineffective (Article 9, Section 16)

• Caps spending at a sustainable level and allows for growth based on population and inflation

• Some exceptions to the limit including PFDs, disasters, G.O. bonds

• Capital spending is not an exception

• Excess revenues above the limit are automatically saved for future generations

2) Check & Balance on Taxes (SJR 4/HJR 5)

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• If the legislature increases a tax or passes a new tax, the voters must approve

• If the people by initiative increase a tax or pass a new tax, the legislature must approve

3) Permanent Fund Dividend (SJR 5/HJR 6)

• “Absent another constitutional amendment, the Permanent Fund dividend program must compete for annual legislative funding just as other state programs.” Wielechowski v. State, 403 P.3d 1141, 1152 (Alaska 2017)

• Establishes in the Constitution the right of Alaskans to receive a PFD

• No Appropriation Necessary to Transfer Money to Pay the PFD

• No Veto of the PFD is Possible

• Any change in the PFD must be approved by the voters

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