On February 18, 2009, Alaska Governor Sarah Palin submitted FY 2010 budget amendments that reduce general fund spending by $445 million (2010 Budget, 2009, ¶1). “[Alaska's]…Department of Revenue also issued a February 2009 interim forecast today based on an FY2010 average price per barrel of $57.78 and estimates revenues of $3.18 billion, which is down $2.1 billion from the fall forecast based on an average of $74.41 per barrel” (2010 Budget, 2009, ¶2).
The cuts allow essential services to continue while making more discretionary ones wait until tax revenues improve (2010 Budget, 2009, ¶3). The cuts reduce the amount of reserves that would need to be tapped by year’s end (2010 Budget, 2009, ¶4). Alaska has $8 billion in savings reserves (2010 Budget, 2009, ¶11), of which $1.36 billion would have to be used in 2009 and $1.2 billion in 2010 (2010 Budget, 2009, ¶12). The Alaska legislature and Governor Palin share the desire to maximize the life of these reserves (2010 Budget, 2009, ¶11).
Paragraphs five through nine of the press release delineate the reductions in detail:
The operating budget is reduced by $382.3 million in general funds. Significant operating reductions include $166.5 million for the additional payment against the unfunded liability for public employee (PERS) and teachers (TRS) retirement systems. There is $284.7 million remaining in the budget to fully fund the state’s obligations to public employers and school districts, and leave PERS and TRS employer rates unchanged. Also, there is a $100 million reduction in authorization to pay exploration tax credits to mirror the funding authorization requested in the current year. A $73.5 million general fund reduction is proposed and is also offset by the new federal reimbursement rate for Medicaid under the economic stimulus package. These funds are made available to states specifically to provide relief from state revenue shortfalls and also to prevent states from eliminating care to people in need (2010 Budget, 2009, ¶5).
There are also some proposed operating increases in the amendments including $8.4 million in Public Safety for Alaska State Troopers and Village Public Safety Officers, $2.3 million for the Inlandboatmen’s Union bargaining unit agreement, and $6.0 million for the Department of Law to proceed with oil and gas and Endangered Species Act issues. Many of these increases were offset by other reductions in the operating budget (2010 Budget, 2009, ¶6).
Proposed capital spending reduces $63.2 million in general funds and increases $139.7 million in federal and other funds (2010 Budget, 2009, ¶7).
The federal and other fund changes include $100 million to finance statewide financial and tax revenue management system replacements. Also, the Department of Military and Veterans Affairs will receive $17 million in federal funds for environmental clean-up at National Guard facilities (2010 Budget, 2009, ¶8).
“We are providing for high-priority capital projects including transportation, schools, deferred maintenance and energy,” Governor Palin said. “The legislature’s recent approval of $100 million for renewable energy projects, plus $25 million in the FY2010 budget will allow us to continue progress in the very important energy area. With our proposed funds, healthy capital budgets of the past few years, and infrastructure dollars in the federal economic stimulus package, we will see increased job opportunities and construction activity across the state (2010 Budget, 2009, ¶9).
Commentary
These entries have documented time and time again Governor Palin’s financial acumen and achievements. The state of Alaska is in a unique position in that 90% of its tax revenue is derived from oil. Both Governor Palin and state legislators are shooting at a moving target when establishing budgets, because the price of oil is highly volatile. The price of oil has crashed below $35/barrel from its high of nearly $150 less than a year ago. Under Governor Palin’s stewardship, Alaska is still running a surplus! This surplus is during bad financial times.
How many states soak property owners with high property taxes, have a steady revenue base – and can’t balance a budget? These states’ Governors should visit their colleague in Alaska and learn how it’s done! Going on a profligate spending spree when those oil prices were at $150 satisfying various special interests, then being stuck with a massive deficit would be considered par for the course in most states. But such a disgrace would never happen on Governor Palin’s watch.
Managing a budget based on steady income is hard enough, but Governor Palin must do it while for practical purposes running a spot market. And when the market does not move in her favor, she has to amend her numbers. The details in paragraphs five through nine might be a little dry, but they indicate a Governor who knows how to prioritize between needs and wants; who knows how to balance budgets; who knows how to deal and work within the constraints of reality; and who is not beholden to special interests and lobbyists. Her projects — even those some might consider “pet projects” are to a one beneficial to the people whom she tirelessly serves.
To be succinct, Governor Palin lives and works in the world as it is, not in the world as she would like it to be.
References
Palin reduces FY2010 spending plan: Overall $445.5 million in GF reductions. State of Alaska, Governor. Retrieved February 19, 2009 from: http://www.gov.state.ak.us/news.php?id=1655
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