Constitutional Budget Reserve drives up cost

A Spectrum, by Rep. Scott Ogan

Alaska is the only state that requires a three-quarters vote for access to a constitutionally protected fund, the Constitutional Budget Reserve (CBR).

This fund is used to fill the growing budget gap. This results in much of the dysfunction recently seen in the legislature going over the constitutionally mandated 120-day session.

During the start-up of the Alaska Pipeline, there were ambiguities in the law in calculating Alaska's royalty share of the oil produced. Gov. Walter Hickel brought the parties to the table and settled most of the claims out of court. The settlements resulted in billions in windfall taxes to the state treasury. The legislature at the time decided if there was a requirement for a three-quarters vote of each legislative body to access that money, it might protect it from being spent as rapidly. In hindsight it has had the opposite effect.

In the last legislative session there was not a three-quarters republican majority in the House or the Senate. This gives tremendous leverage to the democratic minority to blackmail the majority for additional spending in the budget. They withheld their three quarters CBR vote to fully fund the budget unless they secured certain pork barrel projects for their districts. They also used the leverage to keep the budget from being reduced, driving the cost and size of government continually upward. The public process is harmed by making deals cut behind closed doors with the leadership of majorities, minorities and the governor's office.

Many citizens are dismayed at the seemingly childish behavior of the legislature in not being able to finish their work on time. This year was especially bad as the democratic minority has become refined at manipulating the majority. The House and Senate democrats successfully tag-teamed the republican majorities by negotiating different deals with the House and Senate. The Governor then nixed either deal and further confused the situation. They exploited the already acrimonious House-Senate relationship that developed over the House dumping tax and permanent fund raid bills on the Senate. The acrimony was further exacerbated by the House stripping Senate bills and rolling House legislation stalled in the Senate into those Senate bills in the last days of the session. The democrats successfully used withholding the three-quarters vote needed to fund the budget and get out of town. At the end of the day, this hostage taking resulted in nearly $2 hundred million in new spending and debt service for their cooperation. It also resulted in extending the regular legislative session twice.

My suggestion was to fund the administration until January of next year, enabling us to get out of town without being held hostage by the democrats.

We could pass a supplemental next January to finish funding the rest of the fiscal year. This would ensure that the Knowles Administration does not strip money out of a fully-funded budget and leave the next, hopefully republican, administration with a broke bureaucracy until the next fiscal year. It also would have end run the CBR vote. Former legislator, Oral Freeman did it with an outgoing administration. It was considered and even reported in the [Anchorage] Daily News as an option, but with not enough "bravehearts" in the House Leadership, the idea faltered.

Solutions?

Senator Dave Donley, R-Anchorage, introduced a potential fix to the CBR problem, and the House refused to pass it. Sen. Donley also proposed a Constitutional spending limit that failed to pass in the House. Money to government is like blood to cancer.

I believe without some kind of spending limit imposed on the legislature, we are headed for a big fiscal train wreck. The House passing $900 million in new taxes on the permanent fund and income taxes only plugs holes in a leaking system that encourages more government spending. Working Alaskans cannot afford to support the growing budget gap entirely with new taxes. There must be fundamental reforms in place first.

These include, but are not limited to, changing the funding mechanism of the CBR, elimination of some of the 500-plus programs passed into law since big oil money, avoiding further debt service by the state and some kind of Constitutional spending limit to control growth. We must get back to basics and do what government is supposed to do and get out of the business of being all things to all people. We live in the most socialist state in the union.

Most revenue growth should come from resource development. With vast supplies of natural gas both on the North Slope, and possibly in the Mat-Su, coupled with new discoveries in the foothills of the Brooks Range, and the National Petroleum Reserve, there is hope for mitigation of the declining production and revenues from our existing fields. Obstructionist policy makers in the bureaucracy discourage responsible growth of our resource industries. Duplicative regulatory schemes like the Coastal Zone Management Agency must be eliminated. The Department of Environmental Conservation and Fish and Game Habitat division should be merged with the Department of Natural Resources. This would eliminate the arduous bureaucratic turf wars between agencies. These delays cost the industry money and discourage new investment in our state.

There is much work to be done. With an administration that is friendly to reforms rather than jealously guarding every state job, we can get this state on track to a bright economic future. It will not be painless, but doing nothing will have dire consequences for us, for our children and our grandchildren.