Fiscal Plan Review

Senate Finance Committee
April 23, 2019
David Teal, Director, Legislative Finance Division

 Where does Governor Dunleavy?s plan

'88 d? Full PFDs, Balanced Budgets, and a Bright Future
Slide Prepared by OMB
can

525

ERA Balance

520

Billions
'Lul'?Ir"lr?lr 


El ERA Balance UGF Revenues Allowed Transfer to (SF Excess Savings. Draw 

 

Legislative Finance Division 2

Scenario 1: The Governor?s Plan

Slide Prepared by OMB

Projected Source and Uses of State General Funds [5 millions]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sources of Funds 2929 2921 2922 2923 2924 2925 2925 2922' 2923 293'
Unrestricted GF Revenue per R55 2,393.5 2,242.9 2,192.2 2,192.9 2,132.9 2,125.5 2,393.4 2,491.2 2,531.4 2,219.5
Restricted GF Revenue per R53 422.9 455.2 455.9 453.5 459.2 459.3 452.2 453.2 455.2 455.2
Program Receipts not in R55 593.2 519.5 531.3 543.2 555.5 553.9 539.2 593.3 592.2 529.3
Remaining Pomv after PFD Pavments 939.1 1,934.2 339.4 991.3 1,219.2 1,233.3 1,259.9 1,255.2 1,235.9 1,312.3
Transfers[to] Principal under new Savings Rule - - - - - - - [21.9] [245.1] [339.3]
Transfersfrom?to] [59.9] 129.1 455.9 329.9 123.3 145.1 12.1 - -
Net Revenues From Fiscal Notes 429.4 429.5 433.5 443.1 453.9 452.3 459.1 451.9 451.3 459.1
Total Avallable General Funds 4,544.2 4,310.0 4,515.3 4,513.2 4,554.3 5,041.5 5,053.5 5,115.3 5,155.4 5,135.2
Uses of Funds 2929 2921 2922 2923 2924 2925 2925 2922' 2923 293'
Agencv Operations 4,919.9 4,939.2 4,131.2 4,144.2 4,299.2 4,242.2 4,251.2 4,299.4 4,325.4 4,353.5
Debt Service Pavments 129.2 133.9 151.2 192.9 192.5 293.3 293.2 294.1 293.5 193.9
Contributions 392.9 423.1 499.1 419.9 414.4 419.9 424.5 439.4 439.1 442.1
Capital Expenditures 143.4 144.3 143.1 151.4 154.3 153.3 151.9 155.5 159.2 123.1
Net Appropriations from Fiscal Notes 44.2 19.9 19.2 13.3 13.5 13.1 12.3 12.4 12.9 15.5
Total General Fund Appropriatlons 4,544.2 4,310.0 4,515.3 4,513.2 4,554.3 5,041.5 5,053.5 5,115.3 5,155.4 5,135.2
Appropriatlon lelt"l 10,555.4 10,511.1 5,335.0 4,513.2 4,554.3 5,041.5 5,053.5 5,115.3 5,155.4 5,135.2
Total Funds [5 Ilons] 2,505.5 2,243.1 2,552.5 2,342.2 2,122.5 2,154.3 2,241.4 2,232.4 2,334.3
Per Person Dividend Base $2,553 $3,143 $3,415 $3,522 $3,150 $3,130 $3,202 $3,230 $3,254 $3,300
Per Person Dividend Repayment $1,061 512$ $1,333 - - - - - - -
FY2929FY2929 Projected Savings Account Balances [5 millions, end of vear]
2929 2921 2922 2923 2924 2925 2925 2922 2923 293'
Permanent Fund Principal Account [non-spendable] 43529.9 49,943.1 51,391.4 52,329.2 54,335.2 55,952.5 52,535.2 59,232.9 51,959.4 52,399.3
Permanent Fund Earnings Reserve Account 13,592.2 12,925.5 12,222.1 12,159.5 12,933.5 15,924.5 15,312.5 15,299.9 15,5342 15,455.2
Permanent Fund Total 52,121.1 52,324.2 53,513.5 20,021.2 21,424.3 22,322.0 24,333 25,532.5 22,5445 25,3550
?esenre Fund 4,342.1 4,555.1 4,422.0 4,353.3 4,452.2 4,522.0 4,356.2 5,151.1 5,503.5 5,315.5

 

'The proposed constitutional amend mentvvould take effect in FY22, but would use a 3-vear average. So, the FY22 limit would be higherth an expected spending.

an

Status Quo Budgeting

Na PFD, Na Savings, and Na gaad nptians far future Alaskans

     
   

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Slide Pre aredb OMB
525 l3 

$20
And then taxes are the nptian
. 
515 Unnlme 
if153IZIEHA Balance IUGF Revenues lAlluwed lTaxes IPFD Excess Savings Draw

Legislative Finance Division 4

 

 

 

 

The Governor?s Plan

 

 

 

 

 

 

 

 

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Legislative Finance Division

 

The Governor’s Plan
1. PFDs are $3,000 or more every year.
2. Past-year dividends remove money from the ERA, and reduced
earnings on the reduced balances mean we never quite recover (PF
value falls behind inflation).
3. High dividends come at a price of large FY20 reductions in government
services.
4. Deficits closely match numbers in the Governor’s 10-year plan,
reaching a maximum of 15%. A balanced budget is achieved by FY27.
5. The CBR remains healthy: the DGF infusion in FY20 covers deficits in
later years.
6. The ERA stabilizes after paying past-year dividends. This is a strong
sign of a viable scenario.

Legislative Finance Division

6

 The Governor?s Plan without Legislation

 

LFD Fund Model
I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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Memo] BuQet I do" an?. I Dividend and:
?5 mill?) am
I VW tum:
Oparm Budget
sum Stm'ng Pom (FY20) am
. Gm Rm THIN.
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13 a.
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sum DGF Sweep nus ""22
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Popuau'cn Gm Rm mot Sm 4
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12 u?num 000 u? ??lmwm mm QR mm .1110
tho-Amer! ERA Um? s?
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A "no. than 
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?mm
?52m?: POMVP) 500POMV om 525%
0! End: 21 IlCunnSanaao um I?lsmm?w/mm
mm 5mm? mm" 000% Payout bf Dividends and General 
7 mm m?
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.96" -. a" cum-Up Ilium Proof-I9 0 Geneva! Fund 1 an my nu 1 1.37
as Odd Find ?[hybrid 
ea ERA Dav a. - New 50% SledLegislative Finance Division

The Governor’s Plan without:
1.

2.

Legislation that allows the State to retain oil & gas property tax
revenue and
Transfers of the Power Cost Equalization Fund, Community Assistance
Fund and Higher Education Endowment to the general fund

1. PFDs remain at $3,000 or more every year.
2. Expenditures are the same, but lower revenue means bigger deficits.
3. Those deficits consume the CBR in just a few years and then begin eroding the
ERA.
4. That further reduces the balance (and future earnings) of the PF, so the PF loses
value to inflation.
5. The ERA is on a downward trajectory, which is not a good sign of a viable
scenario.

Legislative Finance Division

8

 House Budget (if Surplus is Used for Dividends)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ulnl 
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m? ammumoy mo
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Supplements Budget 50.0
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?a ms "19 mo "'Immune: Rotun 6.55% (cum) 
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Bode! Reserves 3mm I 
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35 51mm P?'mm Fund Plan ?Jill 
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1 mm ?echo-dons mm
Payout loGF yam
40 POMV Payout 5009525% lCu scam 4m "use-o [mum
Ovemde Ends 21 
mm sumac-y 09?? Payout for Dividends and General Fund
7 mm 
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i May We None 
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Legislative Finance Division

The House Budget
1. PFDs are substantially lower than under the Governor’s plan—dipping below
$1,000 until oil tax credits are paid off, then climbing to $1,500 or more.
2. Although there are no ad hoc draws from the ERA, the payout rate is a little too
high to allow the PF balance to keep pace with inflation.
3. Lower dividends mean smaller reductions in government services.
4. Deficits vanish immediately and do not reappear.
5. The CBR balance grows—there are no draws from the CBR.
6. The ERA is stable. This is not a doomsday scenario.

Legislative Finance Division

10

 How Well Does the House Budget Meet Governor
Dunleavy’s Guiding Principles?
1. expenditures cannot exceed existing revenue;
2. the budget is built on core functions that impact a
majority of Alaskans;
3. maintaining and protecting our reserves;
4. the budget does not take additional funds from Alaskans
through taxes or the PFD;
5. it must be sustainable, predictable and affordable.
An Honest Budget: Fiscal Year 2020
https://gov.alaska.gov/an-honest-budget-2020/

Legislative Finance Division

11

 Senate Budget (if Surplus is Used for Dividends)

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

Legislative Finance Division

 

u=o Fuel Mould

A [sirlolnl-lJlxIL Mini 0 olR 
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(S millions) ?no
2 an (:03?va
Misti-nod 
sun FY19
. Gm Ru mm am
Budget Clings (H200) 8 (1825]
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11
sun CQII Bum (WZO-R) OW 10}! Fill sum
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a Mmia?vd PM Tu a
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39. an? CBREMI. 2.38w?lawm mm (3R mm HBO . .
sum: . . . 
36 Pomamm ?nd Plan ?collation. 
3 .PayoutloGF sum
40 PWV Payout 5.00% 

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42 Ovarian Ends 21
?My Payout for Dividends and General Fund
7 ?m
5095 in: . - A -
$dPOWmeDiv. 0% - - . 
9&0:qu Rouse-noonFind 0mm_ Repay Dvidandl Non. 
.1 Dim twin? Dim .
5., 
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on New to PF 50% Shaun ?t a 4

 

12

Senate Budget (with a 50/50 dividend split)

 

LFD Fund Model
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Legislative Finance Division

 

 

 

 

 

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Pllce Seen-do 8pm PM
UGF Revenue] Owe: . I do? SPIN I mldend died:

3 6 mm?) um
sum cost vm
i Opera-19 Budget 
?a SunligPoml (FY20) FY19
Cith Budget Change 8 (1325)
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med Pmpany Tax~ ,u
31 sum DGF Fl?Mimi! w'mmaao
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32. Popumon vaah Rab mar Sm 
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Budget Reserves s:22: .
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3; Papul ?mm

40 POMV Pupil 5.00% ?mm
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:7 Ends 21 IICunmsanaao HEM IFVBGou-uwl via-m
if sumo 9" ?may hm 0'0? Payout for Dividends and General Paul
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4_9 RWIODN 1301
i May We None 
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Swim-i 
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Ming a I - h. 
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as Dd'u Flea . long mm va Plan 4. 6 I. am can50% SledSenate Budget (with a 75/25 dividend split)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

Legislative Finance Division

 

 

 

LFD Fund Mead
olsirlolnln I 
I Pdco Sou-nah Quin Fan-t
.P Halon a I Widenddleck
(S millions) ?no
2 an 0031va
.2. 8mm 89?
um Stm?ngPonuFYM) FY19
. Gm Ru 1.500% mm
Budget Clings (H200) 8 (1825]
School Dd: Reinumunmt 100% am
11
1_2 CQII Budget (W208) ow to}: an an
I:
.1 81pm Budget 50.0 sum
1?Sl
1_e IEVBIQE "lug . SUN
1_7 . Sdaa Tax . 
. Income Tax so
2. Mat: Fad Tax 
a Mmia?vd PM Tu a
DGF Snap nus In?Innate mailman
?Man 
_zs_ Inn-um R. 225% 
34 PF Imam Rotun 6.56% (can) 
2. Pbpl?nn GM Rm mots-u sum
32. CBR 238% 
?mum (BR all?! - IMO
lhpunod ERA Um 0 saga -
:4 sum: 
Pomamm ?nd Plan ?collation. 
3 .PayoutloGF seam
so PWV Payout 5.00Elli! 5222* Immune-o um l?lscoun?wl-Iam
Payout for Dividends and General Fund
7 him-u ?m
SSdSIINuhmtoDiv fo?e?rr 
4_9 9&0:qu Rouse-wowFood 0mm_ May WI. None 
.1 omn- w'mom Odom. 
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as cum-Up Hoary. IGorl-IFurd 1 . I a 
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on New to PF 50% Shaun ?t a 4

 

14