In February of 1996, the Republican Majority of the Nineteenth Legislature introduced a Five-Year Budget Strategy. Oil production was declining 10 percent per year after peaking in FY 1988 at over 2 million barrels per day. The goal of the Five-Year Plan was to bring state spending under control before oil production and therefore General Fund revenues fell. The Benchmark Goal was to cut General Fund spending $250 million over five years. The Republican-led Majority kept its promise to Alaska.

In addition, through the institution of Results-Based Budgeting, the Legislature insisted upon accountability by agencies for their spending through the use of mission statements and corresponding performance measures. Establishing missions and measures means all parties have agreed on what departments are supposed to do with the public's money, and on ways to determine how well they are doing it. It means we can devote more resources to the programs that work for Alaskans, and refocus or eliminate programs that don't. This will make it possible for future Legislatures to concentrate on developing revenues, which will be necessary to ensure increasing financial prosperity for Alaska in the 21st Century.

• The Republican Majority's Five-Year Plan has reduced general fund spending and brought scrutiny and efficiency to the budget process. SEE attached chart.
• Since the Five-year plan was created in 1996, Republican lawmakers have reduced state spending by over $250 million. While this reduction does not get us to a balanced budget, it improves the state's current fiscal position.
• Beyond cutting state spending, the Five-Year Plan gave the Legislature discipline while examining our spending habits before the Constitutional Budget Reserve runs out. The plan has given the Legislature discipline in writing a budget and an awareness, statewide, of our spending habits.
• Because the legislature took a very real look at the state's financial picture five years ago, we have seen the state's bond rating rise. Moody's Investor Service reports, "The long term outlook for the state is stable given the state's prudent fiscal planning. Recognizing the need to bring the cost of government in line with the declining long-term revenue trend, state officials have aggressively reduced spending on a year-to-year basis."
• On page 6 of "The State Spending Spree of the 1990s" (= 168 K .pdf Adobe Acrobat format) by Dean Stansel and Stephen Moore, a report issued by the Cato Institute last May, it documents how in a decade that has seen increasing largesse in state government spending nationwide, Alaska leads the nation in reducing state spending. Some highlights include:
  
  
  1. "Today, almost without exception, state governments are awash in tax revenues. Between 1992 and 1998 state revenues grew by almost twice the rate of inflation plus population growth." The release warned that this money was not returned to taxpayers; instead, "over the past four years, two of every three dollars of the unexpected revenue surpluses has been spent on new and expanded government programs" setting up the risk that the states "may be faced with the same massive deficits at the end of this expansion that created tidal waves of red ink when the 1980s boom ended."
  2. "The study finds that the states increasing spending the most during this decade were Oregon, Texan and Mississippi . . . On the other hand, real spending declined in three states: Alaska, Arizona and Wyoming, . . . ."
  3. Real per capita spending declined in Alaska 9.8 percent.

The Republican-led Majority has taken important steps to help Alaska's business climate remain healthy and grow stronger:

• Results-based budgeting initiative. Helps improve efficiency of the public sector, reducing pressure to increase business taxes or institute new personal taxes to pay for new government spending.
• Tort reform. Guarantees Alaskans legal recourse if they suffer harm from negligent or intentional actions, while ensuring that compensation for such harm is not capricious, but commensurate to the harm done.
• Privatization task force. Inaugurates public exploration of ways to apply efficiencies of private sector competition to delivery of public services to Alaskans.
• Tax stability. Maintains a positive business climate by resisting pressure to impose new taxes on the private sector. Creates economic environment conducive to long-term planning and investment.
• Reducing state spending. Success in trimming annual General Fund spending by $250 million brings improved efficiency to state government, and complements belt-tightening efforts of the commercial sector in the face of increased international competition.
• Long-range balanced budget plan. Begins process of expanding public understanding of the relationship among state revenue, expenditures, and services. Several bills were proposed regarding how future Legislatures should protect Permanent Fund principle, and use some earnings to fund services to Alaskans.
• Land transfer to the University. Passage of bill over governor's veto allows University of Alaska to select 250,000 acres of state land, the resources from which will improve long-term funding stability. Additional selection of 500,000 acres of federal land in Alaska possible with passage of bills sponsored by Congressman Don Young and Senator Frank Murkowski.
• North Slope Natural Gas development. Alaska's North Slope contains an estimated 600 trillion cubic feet of natural gas, not counting the NPR-A or ANWR. The Legislature took the first step in developing this gas in 1998 by passing HB 393, the Stranded Gas Act, and took the next step by passing HB 290 providing for a regulatory framework for natural gas projects.
• ANWR resolutions. The Legislature has repeatedly passed resolutions calling on the federal government to open the coastal plain of ANWR to exploration and development, to decrease U.S. reliance on foreign oil supplies and to promote lower gasoline prices.

Attachments:

• "The State Spending Spree of the 1990s" = 168 K .pdf Adobe Acrobat
  Cato Institute Report, 05-13-99

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