Senate Republican Caucus Reacts to News of Record Breaking FY 2008 Oil Revenues - Challenges Legislature to Increase Savings for Alaska’s Future

Juneau – Today the Senate Republican Caucus reacted to the Alaska Department of Revenue’s news that the General Purpose Unrestricted Revenue for FY 2008 is projected to be a record breaking $8.5 Million.

“This year’s projected revenue is almost 30% higher than last year,” Sen. Gary Wilken, R – Fairbanks, said. “With this dramatic increase in revenue comes an equally dramatic duty to exercise self-restraint in spending and to save for future generations of Alaskans.”

Repeatedly during the 25th Legislature, the Senate Republican Caucus has called for the creation of a long term fiscal plan that includes a commitment to saving. This year in particular, they stepped up the call.

“During the ACES debate last fall, we proposed that a mechanism be put into place to prompt future legislatures to set aside sizeable portions of the increase in oil tax revenue under the new law – particularly revenue generated by the progressivity component of the tax,” Sen. Gene Therriault, R- North Pole, said.

“While the $3.6 billion set aside in SB 256 sounds good, it is a fraction of what we should deposit into Alaska’s savings accounts in a banner year like this one,” Wilken said. “With Friday’s revenue forecast, the legislature has the financial ability to set aside far more money than $3.6 billion.”

The Senate Republican Caucus is challenging the legislature to set aside an additional $3.6 billion of surplus as savings or through a combination of deposits to savings and debt pay down.

“The Legislative Finance Division assures us that this amount is justifiable if the operating and capital budgets stay reasonably contained, or even reduced from the amount spent last year,” Therriault said.

The Senate Republican Caucus’ position is bolstered by a recent Institute of Social and Economic Research opinion. Dr. Goldsmith, an economist and director of ISER, suggests that Alaska should redouble its efforts to save money now and reduce the risk that future generations will be forced to meet Alaska’s operating and capital needs by imposing income tax, sales tax and dipping into the permanent fund earnings reserve account.

“Dr. Goldsmith suggests that we view the increase in revenues over the past few years not as a trend that will continue, but as a windfall,” Sen. Tom Wagoner, R- Kenai, said. “The best strategy for dealing with a windfall is to put as much as possible in the bank and spread the spending out over a long period of time. It’s prudent, it protects future generations. Let’s step up to the plate and do what’s right.”

“With the unpredictability of our oil and gas revenue stream, the revenues we enjoy now might not be enjoyed by future generations,” Sen. Con Bunde, R- Anchorage, said. “It’s not a question of whether we will face sizeable deficits in the future, it’s a question of when; now is the time to save.”

“If we discover in future years that this windfall is a permanent and predictable increase in income, then we can modify the savings plan,” Therriault said. “But for now it would be robbing from future Alaskan’s to spend our non-renewable resource dollars without a plan. A better public policy is to agree that the petroleum wealth of the state should be shared equitably among today’s and tomorrow’s Alaskans.”

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