SCR 101: Relating to offsetting the projected annual general fund revenue shortfall through equal appropriations from the constitutional budget reserve fund and the earnings reserve account.
00 SENATE CONCURRENT RESOLUTION NO. 101 01 Relating to offsetting the projected annual general fund revenue shortfall through equal 02 appropriations from the constitutional budget reserve fund and the earnings reserve 03 account. 04 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 WHEREAS, of the $2,332,000,000 appropriated from the state's unrestricted general 06 fund for the state fiscal year 2005 (FY 2005) operating and capital budgets, unrestricted 07 general fund revenue will fund only $1,960,000,000 of that amount; the shortfall of 08 $372,000,000 in general fund revenue must be offset by funds from the constitutional budget 09 reserve fund (art. IX, sec. 17, Constitution of the State of Alaska) and other sources; and 10 WHEREAS the largest component of the unrestricted general fund revenue is derived 11 from the petroleum industry operating in the state; and 12 WHEREAS the annual revenue generated from taxes and royalties levied on and 13 collected from the petroleum industry varies directly with the price of oil and the amount of 14 oil produced in the state, so that when oil prices increase, state general fund revenue increases 15 correspondingly; and
01 WHEREAS only if the price of oil is sustained at the level of $35 per barrel 02 throughout FY 2005 would the amount of general fund revenue be sufficient to fully fund the 03 operating and capital general fund appropriations made for FY 2005; and 04 WHEREAS the latest forecast for oil prices projects a long-term price of $22 per 05 barrel and a short-term price of $28.30 per barrel, each of which is clearly below the $35 per 06 barrel required to fund FY 2005 operating and capital general fund appropriations; and 07 WHEREAS the shortfall between the amount appropriated from the state general fund 08 and the amount of general fund revenue generated from taxes and royalties levied on and 09 collected from the petroleum industry based on the short-term oil price forecast of $28.30 per 10 barrel results in a $372,000,000 shortfall in unrestricted general fund revenue for FY 2005 11 without considering the possibility of a decline in oil production or a shortfall in other 12 unrestricted general fund revenue from non-petroleum revenue sources; and 13 WHEREAS experience indicates that it is not likely that the break-even oil price of 14 $35 per barrel can be sustained and that, without significant additional revenue from new 15 sources, revenue derived from the petroleum industry cannot satisfy the state's general fund 16 revenue requirements; and 17 WHEREAS the state faces recurring shortfalls in general fund revenue and has, in 18 nine of the last 11 fiscal years, drawn funds from the constitutional budget reserve fund to 19 cover shortfalls between annual general fund appropriations and general fund revenue; and 20 WHEREAS an average of $350,000,000 has been drawn from the constitutional 21 budget reserve fund during the last 11 fiscal years to cover general fund revenue shortfalls; 22 and 23 WHEREAS the projected average shortfall in general fund revenue for the next 10 24 fiscal years (FY 2005 through FY 2014) is $550,000,000 a year; after FY 2014, potential 25 future oil and gas revenue derived from the North Slope gas line and development of new oil 26 and gas discoveries are expected to bridge the fiscal gap between general fund appropriations 27 and revenue; and 28 WHEREAS the current balance of the constitutional budget reserve fund is slightly in 29 excess of $2,000,000,000; and 30 WHEREAS the current balance of the constitutional budget reserve fund would be 31 exhausted within the next few fiscal years if the constitutional budget reserve fund is the only
01 source of funds to offset general fund revenue shortfalls; and 02 WHEREAS the life expectancy of the constitutional budget reserve fund can be 03 extended well into the future if the burden of filling the fiscal gap is equally shared with the 04 earnings reserve account under AS 37.13.145; and 05 WHEREAS the earnings reserve account, the crown jewel of Alaska's fiscal future 06 and an abutment to the bridge to development of Alaska, is the result of wise investment of 07 the Alaska permanent fund; and 08 WHEREAS the permanent fund dividend and inflation-proofing of the Alaska 09 permanent fund are paid from a portion of the funds that accumulate in the earnings reserve 10 account each year; and 11 WHEREAS the use of a portion of the earnings reserve account to offset the projected 12 average general fund revenue shortfalls for the next 10 fiscal years would result in only a 13 relatively minor reduction of the permanent fund dividend; the projected amount of the 14 dividend would decline from $1,921 to $1,889, a reduction of only $32, in the fifth year, and 15 from $2,177 to $2,057, a reduction of $120, in the 10th year; and 16 WHEREAS the use of a portion of the earnings reserve account to offset the projected 17 average general fund revenue shortfalls would have a smaller financial effect on Alaskans 18 than would a state income tax or a state sales tax; in order to raise $275,000,000 to cover half 19 of the projected annual general fund revenue shortfall for the next 10 fiscal years from either a 20 state income tax or a state sales tax, the income tax may cost each family of four $1,059 a 21 year and the state sales tax may cost a family of four $1,035 a year; and 22 WHEREAS the use of a portion of the earnings reserve account to offset general fund 23 revenue shortfalls for the next 10 fiscal years is projected to extend the life of the 24 constitutional budget reserve fund until FY 2012; and 25 WHEREAS the use of a portion of the earnings reserve account to offset the projected 26 average general fund revenue shortfalls for the next 10 fiscal years would not prevent the 27 earnings reserve account from continuing to grow; after paying to inflation-proof the Alaska 28 permanent fund, paying the annual permanent fund dividend, and offsetting half of the general 29 fund revenue shortfall, the earnings reserve account is still projected to grow from a balance 30 of a little over $1,000,000,000 in FY 2005 to almost $2,000,000,000 by FY 2014; and 31 WHEREAS the use of the earnings reserve account to offset a portion of the projected
01 general fund revenue shortfalls for the next 10 fiscal years will promote fiscal accountability 02 by the legislature because the earnings reserve account is the people's money and because the 03 legislature will have to answer to the people on how much is spent from the earnings reserve 04 account to fund state services each fiscal year; 05 BE IT RESOLVED by the Alaska State Legislature that the amounts necessary to 06 fund the projected annual shortfall in general fund revenue through fiscal year 2014 be 07 appropriated equally from the constitutional budget reserve fund (art. IX, sec. 17, Constitution 08 of the State of Alaska) and the earnings reserve account (AS 37.13.145).