The Alaska Citizen's Guide to the Budget


Programs Shifted from General Fund to State Funds:
Did They Cut the Budget? No, They Really Didn't!

Despite the hoopla, the legislature really didn't cut the state budget. In fact, total spending of state dollars has increased over the past five years. What happened is that many programs—and revenue sources—have been shifted out of the category of the General Fund into a category identified in state budget documents as "other state funds." It's true that the General Fund itself has declined by $250 million over the past five years, as Republican leaders claim (in fact, it is down $266.4 million), but the "other state funds" category has grown by $401.1 million. The result? Total funding by state dollars is up $134.7 million. Federal funds spent through the state budget, such as for transportation programs, are up $712.3 million from FY 1996 through FY 2001. Combined state and federal spending through the budget is up $847 million over the five-year period.

What's happening here? Is this a kind of shell game? Yes it is! But in the Real Politik of Juneau during the legislative session, there may be a kind of weird convoluted logic to some of this.

Spending not really off the books. It's still there, but only harder to find! The money really isn't going "off the books" because it's still there in the official budget, advises Cheryl Frasca, a former state budget director who did the analysis. The problems are twofold, however. First, the budget documents are getting so complex that even legislators find them hard to understand. The result is that government is becoming more opaque, which will hardly rebuild public trust. Secondly, the kind of programs being moved out of the General Fund are those that can be matched to a source of revenues. Examples are the Department of Environmental Conservation programs' being tied to fees paid by permit applicants, or payments by oil producers into the state's oil spill contingency fund. Also, economic development programs are being linked to the dividend paid by the Alaska Industrial Development and Export Authority. But what about general public service programs that can't be linked to revenue sources, like education, public protection, or land management? These are left in the General Fund and become the focus of generalized and highly politicized promises for big cuts.

Where, Oh Where Has the General Fund Gone? One of the fundamental features of the Alaska Constitution regarding budget and finance is Art. IX, Section 7, which prohibits the practice of dedicating funds to a special purpose. This feature set the stage for what was to be a modern feature of Alaska state finance, the concept of the General Fund. Clarity of budget was to be enforced by all state funds being deposited in a General Fund. The idea was to prevent budgeting shell games, smoke and mirrors stuff, perhaps much as we are now seeing. Right now it seems we've lost our budget focus. What is a reliable and consistent expression of state budget spending? A decade ago we all knew, now we don't.

Budget Accounts Were not to be Outside the General Fund. The General Fund concept does not preclude establishing various accounts for tracking and managing funds. Since the inception of the state budget, so-called accounts have been used particularly where lawmakers have felt income should relate to outgo of spending for a service. For example, a working capital fund can allow agencies to rent their own equipment annually and allow the Legislature to appropriate from this accumulated fund to maintain the state equipment fleet. These funds are not legally dedicated, but are maintained as a tool of managing funds and budgeting. Over most decades lawmakers expressed the state budget as the General Fund, generally meaning inclusive of all state funds. The exceptions were special state corporations like the Alaska Railroad, Alaska Industrial Development and Export Authority (AIDEA), the Alaska Housing Finance Corporation (AHFC). There is some unclear territory here, and while there is logic behind linking some income to spending burden, this should not undermine the responsibility of clearly identifying total state-related spending. State spending is state spending. It is state spending in total that is the bottom line.

Oddly, while lawmakers have been beating the drums of budget spending reform, articulating things like missions and measures, the critical revenue side of the budget has been allowed to deteriorate into a confusing lack of clarity. It has become opaque. This breeds public mistrust. In many respects, lawmakers have tried hard these last five years, but the unfortunate reality is that the public now has more reason to mistrust budget rhetoric than they did five years ago.

Source: Bradner's Alaska Economic Report, May 27, 2000.


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