By the Parnell Administration’s own numbers, there is no relief in sight. In February, the Governor’s Office of Management and Budget (OMB) gave its annual presentation to the House Finance Committee. Alaska law requires that OMB annually present the State’s 10-year financial forecast. Alarmingly, that forecast is for continued deficit spending in each of the next ten years and presumably, far beyond.
The forecast runs several different scenarios based on oil prices, and even at (a hypothetical) $135 per barrel, the state is still in deficit spending. The big unknown is what year Alaska runs out of funds from its reserve accounts. Under some scenarios, that’s just four to six years from now. What then? Without some drastic course correction, it’s highly likely Parnell will call for a raid on the Permanent Fund, and the imposition of a state income tax.
Incredibly, while we are deep into the largest deficits in Alaska’s history, Parnell could not find a single expenditure in the capital budget to veto in this re-election year. There is little fiscal constraint in an administration that has given us Taj Mahal-like spare Anchorage legislative offices replete with glass elevators and maple bathroom stalls. Add to that the $1.5 million paint job on the governor’s mansion. That debacle led to costly litigation when two bids under $1 million were rejected and the uncertified contractor’s work resulted in EPA violations.
Then there are those endless, wasteful studies -- three natural gas pipeline studies under Parnell and not one piece of pipe ordered. In fact, a recent assessment concluded that of all of the capital projects being studied, the state only has available funds sufficient to construct 8 percent of what’s being studied.
In a recent ADN interview, Parnell stated, “Historically, we’ve always drawn down from our savings in times when price and production were down, and we banked the surpluses when our prices have been up.” Parnell should review the very legislation he sponsored, Senate Bill 21. That legislation capped the Alaska take at high prices so there is no longer a “fill up the saving accounts at high oil prices” option. Parnell eliminated that option.
Parnell is also playing an accounting shell game with the PERS/TRS (Public Employees Retirement System/Teachers Retirement System) transfer of funds. In previous years these payments have been included in the operating budget. Now they have been conveniently moved out of the operating budget into another account, thereby allowing Parnell to claim a lower operating budget, which is a ruse. What the governor does not say is that revenue expectations have fallen by over $2 billion this past year, and that cannot be disguised as anything but a crisis.
Now that Parnell has led us into this briar patch, it is widely anticipated that if he is reelected, he won’t be concentrating on getting us out. The broad political opinion is that within a year of reelection, Parnell will announce his candidacy for U.S. Senate seeking to take Lisa Murkowski out in the 2016 closed Republican primary.
Alaskans should be told that as a state we are, by analogy, dipping into our savings to pay the mortgage, the fuel bill and the car payment and there may not be any money for the kids’ college. This is sheer irony given our trillions of dollars of valuable natural resources. Our leaders must start acting as ranch owners, not ranch hands and carefully monetize our finite natural resources to secure a robust future for generations to come. In the short term, they must start making solid financial decisions and stop putting political spin on Alaska’s glaring financial crisis.