Tuesday, December 16, 2008

Editorial: Count goose eggs before they hatch

Gov. Sarah Palin announced her budget plan for the next fiscal year Monday. Her address to legislators was laden with phrases that smack of fiscal responsibility — “We’ve got to be prudent,” “save for the future,” “live within our means.”

As a whole, the budget reflects those themes. Spending on capital projects is reduced more than $300 million from this year, money for resource rebate checks is cut out and general fund spending is whittled down.

Palin said the budget represents a 7 percent reduction in overall spending — although there’s some debate about the validity of that figure, since it doesn’t include the money Palin proposes spending from the Alaska Housing Capital Corporation savings fund the Legislature created three years ago. Factoring that in, it’s more like a 5 percent reduction.
Either way, a smaller budget is good for Alaska, considering the declining price of oil and uncertainty about future economic conditions.

The problem is, it may not be small enough. In order for Palin’s budget to do all the wonderful things she says it will — provide necessary services, live within our means and save for the future — oil prices will need to average $74.41 a barrel next year. The price is at $38.76 right now,

It doesn’t take a state Revenue Department adviser to realize that’s a significant difference. And it shouldn’t take a clairvoyant to point out this year’s plunge in prices was not expected when the state budget was created last winter. Neither Palin’s administration nor the Legislature saw this coming. As a result, the state is expecting to spend more than $400 million from its savings to balance this year’s budget.

Prices may well dip again and stay lower than Palin’s administration expects. The state should be ready for that by setting a budget that prepares for that possibility.

The budget should focus on priorities — essential services, vital capital projects and investing in the future through supporting health, economic development and education initiatives. It also should keep nonessential capital projects on a waiting list and start them if and when money becomes available.

And don’t forget the part about saving for the future. As this year shows, paying for current cloudy vision takes foresight from the past.

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