Lawmakers skeptical of Dunleavy’s budgeting

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The first few weeks of any legislative session are marked by numerous hearings examining the session’s biggest legislative facelift: the budget.

With big decisions about the course of the state’s fiscal future, persistent structural deficits, and a huge one-time influx of federal money, this legislature faces even bigger questions and challenges than usual. That’s largely because Governor Mike Dunleavy and his administration have opted for an image that many legislatures have found to be overly optimistic and overly reliant on one-time money in a way that obscures the real issues facing the State is confronted with legislators and the public. .

The governor’s budget rollout has earned him headlines suggesting Dunleavy has achieved the balanced budget that has eluded lawmakers and governors for much of the past decade.

As lawmakers get to work understanding the budget, they plan to cut through election-year rhetoric to figure out what really happens once you take off the rose-colored glasses. Here’s a recap of two such efforts from this week:

House Ways and Means looks at Dunleavy’s 10-year plan

The House Ways and Means Committee kicked off with an overview of Gov. Mike Dunleavy’s 10-year plan for the state.

It was a long meeting, but the main takeaway is that the governor’s outlook only balances out with some pretty big and austere parameters. Namely, the state’s infrastructure would continue to age, costs would continue to be shifted to local governments, especially around K-12 education, and the overall growth of state government would somehow be sustained. well below inflation at 1.5% annual growth starting in calendar year 2025. The outlook for the state’s Medicaid budget, a major budget driver, would also only increase by 1 % per year according to the governor’s plan.

How this compares to the 7% inflation recorded last year was an important question for lawmakers and there was no satisfactory answer from Dunleavy’s budget director, Neil Steininger. Steininger primarily argued that since the size of government is largely determined by access to revenue, the absence of revenue in future years will necessarily force government to cut services and other areas…essentially forever ( so it’s not really growth and it doesn’t even keep up with inflation). After many questions, he admitted that the ten-year plan is only a set of political assumptions and is not set in stone.

When the director of the Legislative Finance Division, Alexei Painter, presented an analysis of the budget with a slightly more realistic annual growth factor of 2% which also assumed a more realistic list of political decisions in the future, which showed that the state’s deficit would quickly reach several hundred million dollars which, you guessed it, would require an overdraft from the Alaska Permanent Fund beginning in fiscal year 2025.

While the governor’s budget doesn’t call for an overdraft this year — his desire to top the permanent fund has waned with the influx of hundreds of millions of dollars in one-time federal money — the presentation suggests it would be on the horizon without a real plan.

Rep. Calvin Schrage, I-Anchorage, pointed this out. He argued that by offering an unrealistic picture of the financial future of the state, it prevents the state and its citizens from taking reasonable action now – like savings surpluses, changes to government and the examination of new revenues – which will guide the State in the future.

Join the dots: This certainly highlights Monday’s Legislative Budget and Audit Committee hearing with Craig Richards, chairman of the board of the Alaska Permanent Fund Corporation. While the major issue was obviously the still-unexplained dismissal of executive director Angela Rodell, lawmakers paid considerable attention to the fund’s frequent efforts to model the potential impact of overdrafts on the fund…a decision they are always ostensibly opposed to (and to which Rodell, in particular, was strongly opposed). The conclusion was that the board ordered a re-analysis of the overdrafts until it got a substantially consistent response to Dunleavy’s proposal to overdraw the fund.

I have a feeling none of this is going to go away anytime soon. Despite Richards’ best efforts to convince the Legislature that there is nothing to see here, the Legislature will keep digging.

And they should.

New year, old oxen

It’s no secret that Senator Bert Stedman, co-chair of the Senate Finance Committee and overseer of the budget, isn’t a big fan of Gov. Mike Dunleavy and the administration’s tendency to not offer only the most flattering and politically expedient images of the state’s financial situation. Stedman is also not a fan of the governor’s plans to overspend on the Alaska Permanent Fund or smooth deficits with one-time money, calling them efforts to deceive future generations or hide the true state. of the Alaska budget. At the height of last year’s frustrations, Stedman suggested the legislature might take the unusual step of simply ignoring the governor’s demands.

During the first hearing of the Senate Finance Committee session, he refrained from taking such drastic measures, but said that they planned to suppress the governor’s influx of hundreds of millions of dollars in unique federal money. which he used to balance the budget. And only then, he said, will they start thinking about how that money should be used.

“We will remove non-recurring funds and reduce them to the base budget,” he said. “I think it’s very important that we have a base document to build on because we can, for example, claim that a budget is balanced when it’s not recurring revenue. We want to focus on recurring revenue, so if we can isolate and identify a structural deficit issue, the committee could go ahead and work to try to fix it.

The rest of the hearing — which focused on the state’s production forecast — was largely a trip down memory lane as lawmakers questioned the state about processing capacity on the North Slope (bringing back memories of all the “decongestion” talk of the 2012 session) and the gas supply to Cook Inlet. The main budget conclusion here was that the committee was not particularly pleased to see the state betting on a more optimistic forecast than the producers’ historically overly optimistic forecast.

And then later that day it happened:

Members of the Senate Finance Committee took a trip down the hall to present a pair of giant novelty checks representing the Legislative Assembly’s efforts to transfer nearly $10 billion from the easily spendable portion of the Permanent Fund to Alaska to the Constitutionally Protected Corpus, a figure that rose by $4 billion thanks to Governor Mike Dunleavy’s failed veto.

Why is this important: It’s a clear message that the stewards of the Legislature’s budget do not wish to sell the state’s future to help Dunleavy’s re-election chances.

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