Saturday, June 28, 2014

How does she say this with a straight face ....

In her recent newsletter to constituents Rep. Lora Reinbold had this to say about the recent legislative session:
Fiscal Responsibility
The legislature approved an operating budget of $9.1 billion in total funds in state services and programs.  Non-formula agency operations, what most people think of as "state government" operations, were reduced by $52.4 million in unrestricted general funds (UGF) from FY14, a 2.2 percent reduction.  In addition, the FY14 capital budget also was reduced by $250 million in general fund spending.  Last year we held the line, this year we turn the tide.
In years to come the appropriations of state funds must be reduced in order to put Alaska on a long term sustainable path.  We would like your input on reducing state funding.  Please contact me with any suggestions you may have.  [Bold and italics added.]
I am not sure what "line" Rep. Reinbold has in mind that she held this past session, but it certainly wasn't a fiscally conservative one.

In its two years (2013-14) the 28th Legislature passed -- and the Governor signed -- budgets that represent the two largest spending deficits in Alaska's history (FY 2014: $1.9 billion, FY 2015: $1.67 billion). More importantly, combined with its actions on PERS/TRS in two short years the Legislature drained $6 billion (or 35%) of the $17 billion in the state's savings accounts that they found when they walked in the door at the beginning of their term.

By engaging in those practices, the Legislature dramatically has lowered the long term sustainable revenue level (the level of annual revenue which future generations of Alaska would have available to spend if the current generation limited their spending to the same level) from $5.5 billion, a level at which this generation could have left a strong legacy for future generations, to $4.75 billion -- an astounding drop in just two short years of $750 million (that's three-quarters of a billion dollars) in the promise of annual revenue for future Alaskans.

Accounting for those actions, the legacy that the current generation of Alaskans are on the path to bequeath future generations is one which the University of Alaska-Anchorage's Institute of Social and Economic Research (ISER) has said will be characterized by institution of a broad based [sales or income] tax and use of a portion of the earnings of the Permanent Fund” — in other words, taxes and a reduction in the PFD.

As I have explained elsewhere, far from holding any sort of "line" this Legislature in fact was "the most fiscally reckless in Alaska’s history." If indeed there was any sort of line involved, it was the legislative equivalent of the infamous Maginot Line, the defensive line that the French built at considerable expense after World War I in order "permanently" to deter German aggression, but which the Germans subsequently skipped around in a matter of mere weeks at the beginning of World War II.

A more accurate version of a report to constituents covering the past session on this issue would have been this:
The truth is that we failed at being fiscally conservative these last two sessions.  While we reduced spending some, revenues fell faster resulting in substantial deficits that we did not adequately address.   Regrettably, the deficits have also eaten away significantly at the long term sustainability of current levels of state spending.
I know that I promised constituents during my campaign to vote against unsustainable budgets, but early on I decided to join the Majority Caucus which required me to commit to vote in favor of whatever budget was approved by the House Finance Committee and, ultimately, prevented me from keeping my commitment to my constituents.  I recognize that my commitments to my constituents should come first and won't be making that mistake again.
  We have some hard choices ahead.  We need to significantly reduce spending -- by over a billion dollars more (or nearly 20%) -- this coming year in order to repair the damage that has built up over time and culminated in the bad decisions of the last two years.  But in my opinion we have to do it.  If we don't, we likely are going to face in the very near future, and certainly will leave to future Alaska generations, the need to adopt broad based (sales and income) taxes and use a portion of the earnings from the Permanent Fund just to maintain a moderate level of state services and spending.
Reducing spending at that rate will require all of us in the legislature to step up and make very hard decisions, and I will need your support and efforts to prevail on my colleagues to join me in those decisions.  I recognize that I may not succeed, but I commit to you I will cast the vote you have entrusted to me in the legislature in support of that effort and that I will not put myself again in a position where I am prevented from doing so.
But that's not what she wrote.  Instead, she substituted a rhyme that was on par with "no decline after '99" (some of you will remember that), which turned out to be about as equally factual.

The last Legislature dug a very deep financial hole, with long term implications, that future legislatures are going to need to work very hard to offset.  That effort needs to start with telling constituents the truth instead of making up stories about "lines" that never existed.  I hope that she does better in future newsletters or if she can't bring herself to do it, that her constituents start looking around for someone that can.

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