It is an election year, and that invariably means that the state budget will be discussed by candidates and politically-active factions in the community. RDC has had a long standing position advocating for a sustainable budget for Alaska. If the members of RDC are to make long-term investments, whether it be a fish processing plant, prospecting for a new mine, drilling for oil or investing in a new tourism facility, investors need to have confidence that the government will not drastically change the tax policy once the investment has been made.
In order to see which candidates, special interest groups, and individuals are serious about discussing the budget, and which are more, shall we say, “creative” in the discussion, we at RDC must first have a solid understanding of how our state budget process works.
State unrestricted general funds (UGF) are monies that are not tied to a specific program or project. Many federal programs require a state match in order to receive the money, and will have specific programs for which they must be used. If we cut the match, the federal money goes away. While we can all debate whether or not we want to be beholden to the federal government, it is undisputable that cutting the matching funds takes more money out of the economy of Alaska than simply cutting a UGF expenditure.
UGF operating expenditures total about $5.2 billion. This does not include debt service, tax credits or the extra money paid into the PERS/TERS fund to lower future payments. This money is spent in widely varying amounts on the Departments of Administration, Commerce, Corrections, Education, Environmental Conservation, Fish and Game, Health and Social Services, Labor, Law, Military and Veteran Affairs, Natural Resources, Public Safety, Revenue, Transportation, Courts, and the University. Some relatively smaller amounts are spent running the Governor’s office and the Legislature.
Three of these department operating budgets are so overwhelming that combined they are two thirds of the entire budget. Education (including the University) and Health and Social Services (HSS) budgets combine for 66% of total UGF expenditures. Public Safety, Courts and Corrections combine for 12%. Transportation (DOT) is 7%. So, education, HSS, the entire criminal justice system and the operating budget for DOT is 85% of UGF spending.
Several hot button issues are being currently discussed. Should we expand Medicaid? We get more federal dollars into the economy, and provide more services to some citizens. We also, however, have to pay the required UGF match. Medicaid is the biggest driver of the HSS budget, which is one of the two biggest drivers of the entire state budget. So expanding Medicaid is not a small increase, even if it’s just the state match.
“Fully funding” education is a popular slogan. But, it generally means different things to each person who says it, but I guess it sounds good. So, if a candidate promises to “fully fund” education, and expand Medicaid, they are increasing the budgets of the two largest budgets in the state. If they promise this, and at the same time promise to cut the budget, a serious red flag should go up. And apparently, they want votes more than they want a serious and rational debate on budget issues.
Expansion of Medicaid, “fully funding” education, holding public safety and transportation (DOT) operating budgets flat, and cutting 15% of the budget means completely eliminating ALL other functions of government, including all work on a gas project, permits for all industries, Fish & Game, tax collection, any lawsuits against the Obama administration, etc., etc. Unless of course, the candidate wants to find tax monies from…somewhere. Will it be you? Will it be your business? They don’t seem to talk much about that side of the equation.
If we are to address our very serious budget issues and keep our economy strong, all Alaskans need to hold candidates, special interest groups and individuals accountable for their statements on the budget.
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