The math waiting for us

Angela Rodell. (Mark Sabbatini / Juneau Independent)

By Angela Rodell

Alaska is about to get a new governor, a reshaped Legislature and something few incoming administrations ever get: a windfall.

North Slope crude averaged $122 a barrel in October, one of the highest monthly averages on record. Since the fiscal year began July 1, prices have averaged about $98, far above the $75 the state assumed this spring. New production from fields like Pikka is coming online. And the Permanent Fund ended June at $91.9 billion.

That is good news. It is also a trap.

Remember where we were just eleven months ago. Last December, the state's forecast had oil at $62 a barrel, with petroleum supplying less than a quarter of the revenue available for services and dividends. The budget proposed at the time carried a deficit of more than $1.8 billion. Oil alone couldn't close that gap unless prices averaged nearly $100 for an entire year.

Nothing fundamental about our fiscal structure has changed since. What changed is a war in the Middle East.

The pressure on Juneau's incoming leadership will now run in the opposite direction. After years of flat budgets and unmet needs, there will be a strong temptation to grow spending and make those increases permanent, perhaps supported by a new statewide tax. I understand the impulse. New revenue may well have a place in a durable fiscal plan. But sequence matters. A tax imposed to support a budget built on $100 oil doesn't fix our fiscal structure; it makes that structure bigger. Asking Alaskans to pay more while our population shrinks and state revenues are flush is a difficult case to make, and an even harder one to sustain.

Here is what I'd ask of those who take office in December, and of the bipartisan majorities forming in the House and Senate:

Treat the windfall as one-time money. Refill savings first. Every dollar we put back in reserve now is a dollar we won't have to fight over when prices fall.

Don't build the base budget on $100 oil. New programs and bigger checks are easy to start and painful to stop. A temporary revenue spike should not become the foundation for permanent spending commitments.

Fix what we already own. Fiscal instability carries a cost we rarely count. When budgets get tight, maintenance is often the first thing cut, and the bill only grows. The state's deferred maintenance backlog now stands at roughly $2.3 billion, more than $1.5 billion of it at the University of Alaska. School districts have also told lawmakers their buildings are in crisis. Lawmakers have been told it takes about $180 million a year just to keep the backlog from growing. A windfall year is the time to make a real dent. Consistent investment in maintenance is also how we avoid digging the same hole when prices fall again.

Protect the Permanent Fund draw. Our largest source of general-purpose revenue is now the Permanent Fund's earnings, not oil. Its value depends on discipline: drawing the same sustainable percentage each year, rather than reaching for more because the moment feels flush. The fund is our long-term financial foundation. Protecting it must remain a priority regardless of the political pressures of any given year.

Use the cushion to settle the fiscal plan. Spending limits, the dividend formula and revenue all have to be on the table together, not one at a time and not one at the expense of the others. Those decisions are far easier to make when you aren't staring at a fiscal cliff. We may never have a calmer moment to make them.

Invest what's left in growth, not overhead. One-time money is best spent on one-time investments that make Alaska a place people want to build: infrastructure, faster permitting, housing that pencils, and a workforce we train here at home. Any budget is easier to balance when there are more Alaskans working to carry it.

Because the deepest problem in our fiscal math isn't the price of oil. It's people.

Whatever fiscal plan we settle on has to be supported by the people who live and work here. In Southeast, there are fewer of them every year. Compared with 2010, our region has about 1,700 more jobs but 5,600 fewer working-age residents to fill them, and state projections show that decline continuing for decades. No dividend formula or tax structure can balance the books for a state that is shrinking. Growth isn't an afterthought to a fiscal plan. It's the foundation.

That's why this matters so much here. Juneau's economy rises and falls with the state budget. Every time we lurch from one fiscal crisis to the next, state jobs go unfilled, families hesitate to move here, and builders hesitate to build. Stability tells people it's safe to put down roots. A durable fiscal plan, paired with a genuine commitment to economic and population growth, is the best economic development tool Juneau could ask for.

Those coming in to lead our state will start with a rare gift, a year when the numbers are on their side. The test of leadership isn't how the money gets spent in a good year. It's whether we use it to build a state that is still growing when the next bad year comes.

• Angela Rodell is a former CEO of the Alaska Permanent Fund Corp. and commissioner of the Alaska Department of Revenue who is currently a business consultant and member of Juneau International Airport’s board of directors. Her column appears the second Tuesday of every month.