ANCHORAGE: In the midst of a fiscal disaster, Gov. Parnell will give his annual “State of the State Address.” On Monday, the non-partisan Legislative Finance Division said that Alaska will face $2.5 billion annual deficits after running out of state savings. Meanwhile, Gov. Parnell’s own budget projects a 38% decline in oil production, belying claims that his Oil Giveaway will boost production.

“In just a few short years, the bottom-line fiscal question facing Alaska legislators has changed from ‘How much can we save this year’ to ‘How large is the deficit,’” said the Legislative Finance report.

When Gov. Parnell presented his budget before the 2013 legislative session, he claimed the state would have a $500 million surplus. During the 2013 session, Senate Bill 21 passed, and then the Governor estimated that Alaska faced a $667 million deficit in FY 14. That deficit projection grew to $2 billion in FY 2014 with the release of Parnell’s budget this past December. The Legislative Finance Division’s report projecting a long term $2.5 billion annual deficit highlights how quickly Alaska’s fiscal condition has deteriorated after passage of the Oil Giveaway.

Impacts of Parnell’s Fiscal Disaster:

1. The Anchorage School District is announcing hundreds of additional layoffs this year, representing 6% of teachers. “These reductions are unlike anything I’ve seen in my 23 years with the Anchorage School District,” said school Superintendent Ed Graff.
2. The Anchorage School District is adding an extra class section to deal with layoffs.
3. 600 teacher and staff layoffs already occurred in large school districts earlier in the Parnell administration.
4. The Fairbanks school district also has a large budget deficit.
5. The University of Alaska is on an “unsustainable path” because of state deficits.
6. The Permanent Fund Dividend could be at risk as state savings run out.
7. Tens of thousands of construction and maintenance jobs will not be created as a result of capital budget cuts.

The year before Sean Parnell became Governor, Alaska had a $5 billion surplus. The state continued to run surpluses for the duration of the oil tax regime known as “Alaska’s Clear and Equitable Share,” or ACES, and saved $17 billion in the state’s Constitutional and Statutory Budgetary Reserves.

Parnell lobbied for three years to repeal ACES, and succeeded after an unconstitutional gerrymandering provided him with a one vote margin in the state senate. Passage of Parnell’s Oil Giveaway immediately put Alaska into deficit spending, and presaged the massive deficits the state faces now.

As the Alaska Dispatch reported, “the state has said so long to billion-dollar surpluses and hello to billion-dollar deficits.”