JUNEAU — Alaska has never violated its constitutional spending cap, but many Republican lawmakers consider the limit too loose and want it tightened to limit future government growth.
Under the existing cap, which excludes certain types of spending, this year’s budget could not exceed $10.1 billion. Current spending falls well below that.
So far, House and Senate Republicans have proposed three constitutional measures aimed at restricting spending growth.
These come as lawmakers, faced with a gaping deficit, are expected to debate deeper budget cuts, taxes and use of earnings from Alaska’s oil-wealth fund to make ends meet.
Republican lawmakers who have prioritized a spending limit see it as a way to keep the leaner government, which has resulted from ongoing cuts, from bloating if oil prices rebound and Alaska is again flush with cash. But not everyone agrees it’s a good idea.
Existing limit
Alaska’s constitution sets spending at a $2.5-billion base that’s to be adjusted for inflation and population changes. The limit, approved by voters in 1982, excludes certain types of spending, such as money that goes to Alaska Permanent Fund dividends, bond payments and federal money.
Alaska’s estimated population in 2016 was nearly 740,000 people, an increase of about 275,000 people since 1982.
The $2.5-billion cap in today’s dollars would be about $10.1 billion, said Brian Fechter, a policy analyst with the governor’s Office of Management and Budget. Spending is around $6.1 billion, he said.
His office runs calculations several ways since the provision isn’t specific on how it should be done, he said.
Push for changes
The Senate’s Republican-led majority and minority House Republicans have prioritized tightening the spending cap as lawmakers continue grappling with a multibillion-dollar budget deficit. Any constitutional measure would need two-thirds support in each the House and Senate to go to voters for consideration.
Senate President Pete Kelly, a Fairbanks Republican, expects Senate legislation that, if approved, would set a new spending cap in state law until any constitutional change could be put to voters.
State of play
The Republicans have a solid hold in the Senate. In the House, a Democratic-led coalition holds power.
House Finance Committee co-chair Paul Seaton, a Republican House coalition leader, has appeared lukewarm on the idea of a new cap, saying a cap simply serves to limit future Legislatures from addressing problems they may face.
Meh, says Stedman
Not all Senate Republicans agree about the benefits of a spending cap.
Republican Sen. Bert Stedman, a member of the Senate majority from Sitka, says they don’t work.
Stedman says if you want to control the size of government, you do it through cash flow.
As an example, he pointed to his bill aimed at protecting Alaska’s oil-wealth fund and the yearly check Alaskans receive from it. Lawmakers this year are again weighing the potential use of fund earnings to pay for government. A plan to use fund earnings last year failed and the governor, frustrated by the lack of fiscal policy, cut the amount of the yearly check by about half.
Stedman is proposing draws from fund earnings of up to 4.5 percent of a five-year average of the fund’s market value. He envisions a split where at least half could go toward dividends and the rest could be used as lawmakers see fit — for government services, strengthening the fund or fattening dividend checks. The split may need to be tweaked until the deficit is resolved, he said.
Stedman sees his proposal, set for a hearing Thursday, as having a built-in spending restriction since lawmakers would have to answer to constituents for what they do with that money.
