The Alaska Citizen's Guide to the Budget


1.3.3 Why is the State Budget a Moving Target?

In the early spring the legislature passes a budget for the fiscal year that begins on July 1. By the time the fiscal year ends 12 months later, the budget has changed size many times.

There are a number of logical reasons why the state budget is a moving target. Just like a family budget, neither revenues nor expenditures turn out to be exactly as expected. It makes sense for the budget to be flexible to adjust to these changing conditions, but it does add to the confusion in trying to understand what is in the budget. These tables show how the Fy 2002 budget changed between the time it was passed before the year began (Enacted), and the time the year had ended (Authorized). It is only some time after the year has ended that we really know how much was spent (Actual).

Evolution of the FY 2002 State Budget—By Expenditure
(million $)

Budget Version
Enacted
Authorized
Difference
 
Spring 2001
Fall 2002

-

Authorization
$5,407
$5,927
$520
...Operating
3,995
4,225
230
...Capital
1,163
1,425
262
...Statewide
250
277
27
PF Inflation Proofing
693
602
-91
PF Dividend
1,106
850
-256
TOTAL
$7,206
$7,379
$173
Item: Draw from CBR
474
777
303
Source: Summary of Appropriations, 9/14/01 for Enacted, 8/16/02 for Authorized including Personal Communication with David Teal, 10/25/02.

 

Evolution of the FY 2002 State Budget—By Source of Funds
(million $)

Budget Version
Enacted
Authorized
Difference
 
Spring 2001
Fall 2002

-

Authorization
$5,407
$5,927
$520
...General Fund (+ CBR)
2,404
2,504
100
...Federal
2,082
2,306
224
...Other
921
1,117
196
PF Inflation Proofing
693
602
-91
PF Dividend
1,106
850
-256
TOTAL
$7,206
$7,379
$173
Source: Summary of Appropriations, 9/14/01 for Enacted, 8/16/02 for Authorized including Personal Communication with David Teal, 10/25/02.

 

Here are some reasons why the budget changes in size as the year progresses.

1. There are always some supplemental appropriations added to the capital and operating budgets to account for unanticipated expenses. There are also reappropriations of funds that were previously appropriated but not spent.

2. The amount that the state receives in Federal grants is never exactly the predicted amount.

3. Expenditures for fee-supported activities, like the International Airports, will probably be different from the levels originally budgeted.

4. Inflation proofing is based on the actual rate of inflation during the budget year. At the start of the year this is just an estimate.

5. The amount paid out as Permanent Fund dividends at the end of the year is based partly on the earnings of the fund during the year. If the actual earnings are higher or lower than predicted, the dividend payout will be higher or lower than in the enacted budget.

The size of the draw on the Constitutional Budget Reserve (CBR) depends upon how big the gap is between general fund spending and general fund revenues. Since general fund revenues come primarily from oil, they are very sensitive to the price of oil and are never estimated with complete accuracy at the start of the year. Variation in the estimated size of the CBR draw during the year does not affect the overall size of the budget, but it is an important indicator of the short-term fiscal health of the state.

 

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Page updated November 13, 2002

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