Op-Ed: Strengthening Alaska’s constitutional spending limit

The American cowboy and social commentator, Will Rogers famously stated, “If you’re in a hole, stop digging.”

Generally speaking, Alaskans understand and appreciate this kind of plainspoken common sense. 35 years ago Alaska’s voters expressed their appreciation for such common sense and reaffirmed that support four years later.

In 1982, by a vote margin of 61% to 39%, Alaskans ratified our current constitutional appropriation limit (aka a “spending cap”). In 1986, when Alaska’s voters had the chance to vote again, choosing to retain or reject the spending cap, the margin was even more overwhelming—71% for the spending cap, 29% against.

While the intention was good behind the drafting of what is now Article IX, Section 16 of Alaska’s constitution, the spending cap has proven largely ineffective and there are some understandable reasons for that failure. Hindsight is usually 20/20, foresight frequently not so much. Alaska’s current revenue and appropriations picture looks much different in 2017 than it did in 1982. For instance, in 1982 per capita state spending was approximately $15,300 while 2016 per capita spending was about 1/3 of that at $5,300.

The current constitutional provision stipulates that total spending (excluding dividend payouts, general obligation bonds, federal funds, among several others) may not exceed $2.5 billion 1982 dollars adjusting for inflation and population. In layman’s terms, the constitutional spending limit for the current budget year is $10.1 billion, the actual budget we’re operating under is approximately $4.7 billion or 53% below the spending limit.

Since 2000 actual spending has only come close to the current spending cap twice. In 2009 and 2013, actual spending came within $200 million of the constitutional limit. That’s right, $200 million was considered “close” to the current cap. Clearly, our constitutional appropriation limit is broken and desperately needs to be revised.

The legislature has done a respectable job cutting state spending in the last several years; total reductions since 2015 are in excess of $1.5 billion. However, we must continue reducing until our spending is sustainable for the long-term—simultaneously, we must put protections in place to ensure we don’t allow earlier reductions to be undone.

That’s why, in the second week of this legislative session, I introduced my keystone legislation—HJR 7 which would revise and strengthen Alaska’s constitutional spending cap.

HJR 7 provides two significant changes to the constitution:

Rather than limiting spending to a specific number (e.g. $2.5 billion in 1982), it limits spending to the previous year’s spending after adjusting for inflation and population on a three year rolling average; andIt stipulates that years where the state is in a deficit position, like we are currently, there can be no increase in state spending (the only exception being spending necessitated by a state of emergency).

Since Alaska is currently in a deficit situation there could be no increase in total state spending for the coming budget year. However, even if the state was not facing a deficit and could increase spending, it couldn’t increase spending by more than $200 million over last year ($5.4 billion to approximately $5.59 billion).

I’m sure that still sounds like a lot, but consider this: between 2007 and 2009 state spending ballooned from $5 billion to nearly $7.4 billion—a $2.4 billion increase in a two year period! Had this proposed language been in place during that time period spending increases could not have exceeded $400 million, or 1/6th of actual growth.

Since 2012, state spending has been consistently declining—first gradually, but more sharply during the last two years. My hope is that we’ll continue reducing spending this year and next and by the time this amendment could be placed on the ballot in 2018 we will be at one of the smallest budgets in state history. This would mean the new amendment would go into effect at a low period of state spending rather than the current amendment that was artificially inflated to try and account for future spending patterns.

HJR 7 is one of three proposed constitutional amendments to limit spending already introduced within the first three weeks of this legislative session. My other MatSu colleagues and I have led out on this issue because we remain convinced that prohibiting new spending growth is equally important as continued spending reductions. I’ve said that this spending cap is a “contract with Alaskans for fiscal restraint.”

Any of these new proposals have a long road ahead of them, but Alaskans deserve to vote on a meaningful constitutional spending limit in 2018.

Rep. Cathy Tilton represents House District 12 which includes Butte, Chugiak, Eklutna, Fairview Loop and Peters Creek. She is in her second term as a member of the Alaska House of Representatives. She currently serves on the House Finance Committee where her efforts focus on the budgets for the Departments of Administration, Fish and Game, Health and Social Services and Natural Resources.