Alaska state budget (2008-2009)
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Alaska faced a $1.65 billion budget shortfall for fiscal year 2009[1] and a similar shortfall for fiscal year 2010, $1.25 billion, in light of drops in oil revenue.[2] In early January 2009 Senate President Gary Stevens stated that the state was facing a budget deficit as large as $2 to $3 billion for FY 2010. [3] The state budget spending-versus-revenue gap is largely due to a decline in the price of oil. In December 2008 state officials anticipated a $388.7 million surplus for FY 2010 but in just two months revenues dropped.[2] In response to the state budget crisis Gov. Sarah Palin proposed that the state draw on reserves. A total of $1.36 billion and approximately $1.2 billion are estimated to be withdrawn for FY 2009 and FY 2010 respectively. “Responsible reductions and prudent use of reserve funds that we had set aside for tougher times will help us weather the storm,” said Palin. The includes Constitutional Budget Reserve totals $7 billion. [4]
[edit] Impact of budget woes
- According to Alaska Labor Department statistics the state's January unemployment rate increased to 7.9 percent, 1.5 percent above January 2008's rate. Despite the unemployment increase the department's statistics reports that the number of payroll jobs in January is above last year's count by 5,200 jobs. [5]
- The Juneau School Board reported that the student-to-teacher ration will be increasing for the 2009-2010 school year due to budget cuts. In the boards recently approved $70.8 million budget 13 full-time teaching positions were eliminated, creating a savings of approximately $1.1 million. The ratio for kindergarten through second grade will remain at a pupil-teacher ratio of 21 to 1. However the rate will change for grades 3 through 12. Rate changes vary: third through fifth graders will increase from 24:1 to 25:1; six through eighth grades will increase from 20.5:1 to 21.5:1; and ninth to twelfth grade classes will increase from 25.25:1 to 26.25:1. [6]
- On February 12,2009 the acting mayor of Anchorage announced an additional $3 million dollar cut to the city in light of a $17 million budget shortfall. The city fire department in turn will not be filling it's 14 vacant positions. [7]
- The Matanuska-Susitna Borough School District is anticipating a $9 million shortfall for FY 2010 with no upgrades and only considering the maintenance of current services. The total budget is estimated at $200 million. [8]
- In response to the budget shortfall Gov. Palin implemented a hiring freeze in January 2009. Students, college and graduate interns, seasonal positions , positions essential for the safety of Alaska and temporary substitute positions are some of the positions exempt from the hiring freeze. Gov. Palin additionally instituted a purchasing restriction. [9] [10]
[edit] Budget background
Alaska's fiscal year runs from July 1 to June 30 of the following year, with year-end accruals made through August. Every state agency submits requests and statistics on the revenue and spending before the Governor releases a recommended budget to the Legislature by December 15. The Legislature convenes on the third Tuesday in January. Once the House and the Senate approve and make any necessary changes to the budget bill, the bill is passed back to the Governor. If an appropriation bill is transmitted to the governor after session, the governor has 20 days to review the bill and exercise line item veto power. [11]
- FY 2009's budget includes $5 billion in spending from the state’s general funds, a 34 percent increase over FY 2008's budget. [12]
[edit] Budget figures
The following table provides a history of Alaska' expenditures and gross domestic product (GDP).
| Fiscal Year | Expenditures (billions) | GDP (billions) |
|---|---|---|
| 2000 | $8.5 [13] | $27.0 [13] |
| 2001 | $9.0 [13] | $26.6 [13] |
| 2002 | $9.4 [13] | $29.2 [13] |
| 2003 | $9.7 [13] | $31.2 [13] |
| 2004 | $10.0 [13] | $35.1 [13] |
| 2005 | $10.0 [13] | $39.3 [13] |
| 2006 | $10.8 [13] | $43.1 [13] |
| 2007 | $11.6 [13] | $44.5 [13] |
| 2008 | $12.5 [13] | $46.0 [13] |
| 2009 | $13.4* [13] | $47.5* [13] |
- NOTE: The figures for FY 2009 won't be finalized until the end of the fiscal year.
[edit] Ideas about why the crisis exists
- Oil prices rose every year for the last seven years, topping out at an average of more than $91 a barrel last year. Prices in 2008 peaked at above $140, but closed at $32.26 on January 23, 2009. According to the Department of Revenue oil production levels for FY 2009 are relatively stable but are falling approximately 3,000 barrels a day. State officials reported that unrestricted revenue for FY 2009 is projected at $5.5 billion, or $1.2 billion less than projected in the Fall 2008 forecast. In total oil revenues provide 87 percent of the anticipated unrestricted revenue. [14]
- Alaskan oil companies are saw a decline in profits in 2008. For example, in 2008 BP Exploration (Alaska) Inc. earned a total of $1.95 billion in profits, down 21 percent from 2007. Additionally BP paid $3.3 billion in taxes in Alaska last year. 71 percent of the total taxes paid in 2008 71 percent came in the form of production taxes, compared to $1 billion in 2007 and $665 million in 2006. Conoco Phillips, the state's largest oil producer, reported similar statistics. BP Alaska averaged 197,000 barrels per day last year, a 6 percent decline from 2007 and down 12 percent from 2006. [15]
[edit] Proposed actions
[edit] Governor Sarah Palin
In light of the state's current deficit Palin reduced spending by $268.6 million and planned to draw $1.36 billion from the state's $7 billion reserve. Palin also proposed roughly $17 million in reductions to departments and implemented a salary freeze for state employees in January 2009. However, Gov. Palin emphasized that massive cuts to the state government and services could do more harm than good. "We were really trying very hard to minimize the impact on public services, those types of things. Because I think that with the current economic conditions there's sensitivity. If there were some massive reductions, or massive layoffs, that would have an unintended consequence of putting Alaska further into a recession," she said.[1] However, in anticipation of a looming $1.25 billion deficit, due to a sudden drop in oil revenue, Gov. Palin again proposed withdrawing funds from the state's reserves. The Governor's FY 2010 budget recommendation includes an operating budget reduced by $382.3 million in general funds.[2]
[edit] Republicans
In reaction to the state's widening current and future budget deficit Sen. Bert Stedman said that it's important not to overreact. "We can't overreact and slash and burn the operating account or we'll push the state into a recession," he said.[1] However, Rep. Mike Hawker said that in light of the current budget bill that passed the House in March 2009 state legislators need to continue looking for ways to respond to the state's decreasing oil revenue. "This is a responsible budget but not a sustainable budget," said Hawker, referring to oil production's steady decline. "It meets the needs of Alaska but also needs to be the beginning of a new discussion about what we expect from government and how we are going to pay for it." [16]
[edit] Democrats
Although the state's operating budget passed through the House on March 13,2009 not all Democrat lawmakers for pulling about $2.6 billion from the Constitutional Budget Reserve to cover deficits in the current and the next fiscal years. House Minority Leader Beth Kerttula said that pulling out cash assets could leave the fund vulnerable. "If we have to liquidate we could be losing another billion bucks," Kerttula said, if the fund is left vulnerable. Of the state's FY 2010 budget as a whole, Rep. Harry Crawford said, "There are some new initiatives, and we've cut back some, but basically we're at the same place we were at the beginning of the year." [16]
[edit] Economic Stimulus Package
Gov. Sarah Palin speaks about federal stimulus funds |
Alaska is expected to receive approximately $930.7 million from the $787 billion economic stimulus package.[17] According to White House officials the stimulus bill is estimated to create or save 8,000 jobs. [18] However, on March 19,2009 Gov. Sarah Palin announced that she would accept only about half of the federal funds. The Governor noted that in order for the state to accept energy funds, the state would have to adopt uniform building codes, which she said would require policing. This, Palin added, is not sensible for the state. Gov. Sarah Palin said:
"Simply expanding state government under this federal stimulus package creates an unrealistic expectation that the state will continue these programs when the federal funds are no longer available.”[17]
However on March 24,2009 Alaska legislators said they were likely to accept at least most of the federal economic stimulus money that Palin was turning away. Senate Majority Leader Johnny Ellis said that he would be surprised if the state gave up "much or any of the federal money." [19]
For more information on how the federal stimulus funds are being used in the state of Alaska, visit the state recovery website.
According to preliminary reports Alaska is expected to receive:
- $3.5 million in stimulus funding for energy improvements at Fort Wainwright [20]
- $3 million for housing and urban development [21]
- $115 million to balance the state education fund [22]
- $12.9 million for special education [23]
[edit] Budget transparency
Alaska currently has partial transparency, because of its Checkbook Register Online.
[edit] Economic Stimulus Transparency
- The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the U.S. Of that $787 billion stimulus package, it is estimated that 69%, or over $541 billion, will be administered by state governments.[24]
- It is estimated that Alaska will receive approximately $930.7 million from the economic stimulus package.[17]
- The economic recovery website for Alaska is available here.
[edit] Legislation
Alaskan lawmakers have not yet passed legislation to place spending transparency online. However, in the first week of February 2008, the Division of Finance created a new website, the Alaska Checkbook Online, that discloses some aspects of the Alaska state government's spending practices on an ongoing basis. The site is similar to having a checkbook register online.[25]
[edit] Government tools
Alaska Checkbook Register Online features:
- Payments to vendors and grantees who received at least one payment of $1,000 or more in the current fiscal year through the end of June 2008 are included. (Individual payments of less than $1,000 are not included.)
- The information provided includes the name and location of the vendor or grantee, the purpose of the payment, and the state agency or department that requested the payment.
- Twenty-six different types of payments are excluded for confidentiality reasons.[26]
The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:
| State Database | Searchability | Grants | Contracts | Line Item Expenditures | Dept/Agency Budgets | Public Employee Salary |
|---|---|---|---|---|---|---|
| Alaska: Checkbook Online |  |  | | | | |
- Community funding databases:
Alaskans can access two online databases that allow users to search state grants, revenue sharing, and capital project funding given to Alaskan cities and towns. The Community Funding Database provides information on the year, grant type, recipient, project description and status, award amount, disbursement information, and staff contact for each entry.[27]
The Capital Projects Database contains descriptions, funding levels, and status for over 16,000 capital projects in Alaska communities.[28]
[edit] Support for creation of the database
Alaska's Checkbook Online was placed made available thanks to the support of Governor Palin.[29]
The original sponsor of the legislation authorizing the online spending database was Sen. Bill Wielechowski (D - Anchorage).[30]
In early 2008, Sens. Wielechowski and Ellis proposed SB 201, known as the Alaska Open Government Act, that would mandate additional information be added to the Alaska Checkbook Online database.[31],[32]
Alaska Senate Bill 201 was supported by Americans for Tax Reform[33] and the National Taxpayers Union.[34]
[edit] Independent transparency sites
None.
[edit] Public employee salaries
None. Alaska Checkbook Online does not feature state employee salaries.
[edit] Accounting
The Alaska State Constitution says in Section 9.14 that the State Legislature is to appoint an auditor at its pleasure, and that the auditor is responsible for performing post-audits, which are to be reported to the Legislature and Governor of Alaska. [35]
The Legislative Budget and Audit Committee is responsible for overseeing audits. The Committee is composed of five members from the Senate and five members from the House of Representatives.[36]
Under the Legislative Budget and Audit Committee, there is the Legislative Audit agency. This agency performs audits that are reviewed by the Legislative Budget and Audit Committee. Audits are performed by this agency in order to ensure that Alaska state adminstrators comply with financial regulations and adequately manage their state programs. In addition, the agency performs any special audits that are requested by legislatures who sit on the Legislative and Budget and Audit Committee. [37]
The Legislative Audit agency is headed by the Legislative Auditor. The current Legislative Auditor is Pat Davidson. [38]
[edit] See Also
Alaska taxpayer-funded lobbying
[edit] External links
- Model transparency legislation from the American Legislative Exchange Council is available at this link.
- Institute of the North
- Alaska Checkbook Online, official website
- Division of Finance, Alaskan government
- State budget surpluses could dry up
- The Alaska Citizen's Guide to the Budget
[edit] Additional reading
- Gov. Sarah Palin,"2009 State of the state address," January 22,2009
- Fairbanks Daily News-Miner,"Alaska Legislature considers uncoupling oil and natural gas taxes to boost state revenue," March 13,2009
[edit] References
- ↑ 1.0 1.1 1.2 Anchorage Daily News,"Alaska budget hole is $1.65 billion," February 4,2009
- ↑ 2.0 2.1 2.2 Reuters,"Alaska sees $1.25 billion budget gap on oil price drop," February 19,2009
- ↑ Juneau Empire, "Declining oil prices leave state facing shortfall", January 21, 2009
- ↑ Gov. Sarah Palin,"Palin Reduces FY2010 Spending Plan," February 18,2009
- ↑ Associated Press,"Alaska's unemployment rate increases in January," March 6,2009
- ↑ Juneau Empire,"Pupil-to-teacher ratio to increase next school year," March 18,2009
- ↑ ABC,"More Anchorage budget cuts," February 13,2009
- ↑ Anchorage Daily News,"Mat-Su schools face budget shortfall," March 3,2009
- ↑ Gov. Sarah Palin,"Hiring freeze," January 23,2009
- ↑ Gov. Sarah Palin,"Hiring freeze update," February 6,2009
- ↑ State of Alaska,"Life cycle of a budget," retrieved March 25,2009
- ↑ Fairbanks Daily News-Miner,"A closer look at Palin’s budget cut claims," September 6,2008
- ↑ 13.00 13.01 13.02 13.03 13.04 13.05 13.06 13.07 13.08 13.09 13.10 13.11 13.12 13.13 13.14 13.15 13.16 13.17 13.18 13.19 US Government Spending,"Alaska State and Local spending," retrieved March 25,2009
- ↑ Department of Revenue,"Revenue Releases FY09 Forecast Update," February 3,2009
- ↑ Anchorage Daily News,"BP profits decline in '08," March 18,2009
- ↑ 16.0 16.1 AssociatedPress,"Operating budget passes Alaska House," March 15,2009
- ↑ 17.0 17.1 17.2 Gov. Sarah Palin,"Governor Accepts Half of Stimulus Funds," March 19,2009
- ↑ American Recovery and Reinvestment Act,"Estimated job effect," retrieved March 25,2009
- ↑ Anchorage Daily News,"Legislators want to accept stimulus funds," March 25,2009
- ↑ KTUU,"Alaska's military installations to benefit from stimulus," March 21,2009
- ↑ KTVA,"Alaskan housing programs to receive nearly $3 million," March 25,2009
- ↑ Alaska Politics Blog,"Alaska school officials: Stimulus 101," March 16,2009
- ↑ Associated Press,"Alaska Democrats pile on Palin over stimulus money," March 21,2009
- ↑ National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
- ↑ National Public Radio, http://www.npr.org/templates/story/story.php?storyId=18764744, February 7, 2008
- ↑ Payment systems excluded based on confidentiality analysis
- ↑ Grants: Community Funding Database
- ↑ Capital Funding: Capital Projects Database
- ↑ Alaska Checkbook Online, "Overview"
- ↑ SitNews, "New Legislation Would Open The State's Checkbook to Public Scrutiny," January 7, 2008
- ↑ Text of SB 201
- ↑ Americans for Tax Reform, "Letter endorsing SB 201," February 20, 2008
- ↑ Americans for Tax Reform, "Letter support SB 201," February 20, 2008
- ↑ National Taxpayers Union, "An Open Letter to the Alaska Senate: Taxpayers Support Online Spending Transparency (SB 201)," March 7, 2008
- ↑ Alaska State Constitution, Section9.14.
- ↑ Legislative Budget and Audit Committee, 2009-2010 Membership
- ↑ Alaska Division of Legislative Audit, Organization and Function
- ↑ Alaska Division of Legislative Audit, Organizational Chart
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