Jeremy Price

GUEST COMMENTARY: Spending cuts, not tax hikes, will restore fiscal balance

With two weeks to go before a potential government shutdown, the state legislature appears no closer to writing a budget or narrowing the $3 billion deficit than when the special legislative session began. Both sides are sticking to their stories. There is agreement on dipping into the Alaska Permanent Fund. But Gov. Bill Walker and the Democratic-led House coalition still insist on raising your taxes. The Republican-led Senate still wants to cut spending and impose a hard cap to restrain future excesses. The Senate has much the better end of this debate. Here’s why. The House and the governor are so afraid of their own tax increase that they hid behind school children when they approved it, calling it an “education tax,” even though the revenues would not be limited to education spending. That amounts to carrying the water for the big spenders, tax hikers and government unions. Walker’s stair-step “compromise” proposal would impose a de facto income tax, but he won’t call that an income tax either. The Senate, on the other hand, voted decisively against an income tax in the regular session. Its members owned their decision, and there isn’t any reason to think they will act differently in the special session. Nor should they. There’s also no reason to believe Alaskans will get behind the idea. A recent poll found 58 percent of state residents oppose an income tax. But instead of bowing to this reality, Walker offers vague platitudes about a “broad-based tax” while refusing to call it what it really is. The reason is simple: He’s in trouble politically, and spelling out how he wants to increase taxes will increase that trouble. Walker now ranks in the bottom five when it comes to popularity among governors, with a 53 percent disapproval rating. Part of his popularity problem is the hit he took last fall for cutting in half the Permanent Fund dividend. That experience should serve as an object lesson for the governor as he and his allies once again ponder ways to take more money out of Alaskans’ pockets. Like virtually every other state that finds itself in dire fiscal straits, Alaska has a spending problem, not a revenue problem. That’s why the response to the current crisis should be judicious spending cuts in the current budget, coupled with a real spending cap — lower than the one imposed in 1982 — that will help prevent the problem from arising again. Whatever happens in Juneau, Alaskans will be forced to bear the consequences of past budget mismanagement through diminished services, a reduced dividend check, an income tax, or some combination of those options. But instead of implementing policies that perpetuate a bloated bureaucracy, we should reinforce good government and set Alaska up for future economic growth. In fact, an income tax would make the problem worse, as Adam Millsap, a research fellow at the Mercatus Center at George Mason University told the state Senate Labor and Commerce committee in April. “States experience slower per capita income growth following the adoption of an income tax,” he told the lawmakers. Raising taxes won’t solve the problem. The governor is right about one thing. The state’s revenues should match up better with the state’s spending. He’s just wrong about which needs to change. Jeremy Price is Alaska state director of Americans for Prosperity. He lives in Anchorage.

GUEST COMMENTARY: Budget crisis highlights need for spending cap

Irresponsible spending by state lawmakers has left us with a multibillion-dollar budget deficit. This latest crisis underscores the need to tighten the state’s “spending cap” on annual expenditures, and a bill recently passed in the Alaska Senate is a good start. Senate Bill 26 imposes a statutory spending cap of $4.1 billion in general fund appropriations each year, which would grow with inflation. A statutory cap — which can ultimately be set aside during the budget process — would be less effective than a Constitutional limit, but it is a start. Whatever form it takes, a revised spending cap is desperately needed to put our fiscal house in order over the coming years. Alaskans have been supportive of the idea for more than three decades. When the state’s current constitutional spending cap was put before voters in 1982, 61 percent voted in support. When given the option to overturn the limitation four years later, the margin in favor of the spending cap was even greater: 71 percent to 29 percent. More recently, a 2015 poll by the Alaska Chamber found a majority of the state remains in favor of spending caps. Regrettably, the constitutional spending limit that voters approved in the ‘80s has proven to be woefully insufficient to address the budgetary challenges of 2017. Simply put, it is set too high to be useful. Under the current provision, which excludes certain types of government funds, the limit for this year’s budget is $10.1 billion — more than double the budget of $4.7 billion. In the last decade, state appropriations have only come close to the current cap twice — once in 2009 and again in 2013. That in itself is alarming, given how high the spending limits are set. The cap will need to be drastically reduced if it is to serve as an effective check on government spending. With a tighter spending cap in place, we would not find ourselves scrambling to cover a $3 billion budget shortfall. Historically, the state budget explodes when oil fetches a high price, leaving us vulnerable to massive cuts when prices fall. For instance, state spending in the years between 2004 and 2013 more than doubled, from about $3 billion to $8.7 billion. Since then, falling oil prices have forced the state to gradually cut back. An effective spending limit would compel lawmakers to preserve a leaner government that is more sustainable over the long term. As we look for ways to cover this year’s deficit, our focus should be on cutting wasteful and unnecessary expenditures. Legislators have done an admirable job of reducing spending over the last few years, but plenty of bloat remains to be cut. The facts speak for themselves. Alaska has one of the biggest public sectors in the country, second only to Wyoming; 24.2 percent of Alaska workers are employed by the public sector (federal, state, and local), compared to a national rate of 15.5 percent. In 2015, the state government spent more than $18,000 per resident, far more than any other state in the country and more than triple the national average, which is below $6,000. In addition to instituting a new spending cap, Senate Bill 26 would use about $2 billion in investment earnings from the Permanent Fund to cover the budget shortfall. It’s regrettable that using those funds has become necessary, but doing so is preferable to raising taxes, as some lawmakers have proposed. New taxes would burden hardworking families and make the state less attractive to new businesses and workers, leading to a decline in economic growth. Rather than squeeze more revenue from taxpayers, state lawmakers should prove they are responsible stewards of public funds by enacting an effective state spending cap. If successful, they could ensure fiscally-responsible budgets for decades to come. That’s a win for all Alaskans. ^ Jeremy Price is the Alaska State Director of Americans for Prosperity.
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