State budget reserve could run out after two more years of funding government

Alaska's Constitutional Budget Reserve could only last for two more years if the state keeps pulling funds from it at the same rate as this year's proposal, and the size of Alaskans' PFD checks might again be put on the chopping block if lawmakers don't find a long term solution to the state’s budget problems.

Lawmakers are considering pulling nearly half a billion dollars from the Constitutional Budget Reserve in order to address the state's more than $600 million deficit to help pay for the budget.

According to David Teal, the Alaska Legislative Fiscal Analyst since 2014, lawmakers have pulled around $2 billion to $2.5 billion per year from the account, draining the reserve. Once over $10 billion strong, the CBR balance is now barely more than $2 billion. By pulling $600 million to help pay for the budget, lawmakers are slashing nearly one-third of the CBR's balance, which means the state could only sustain current spending and revenue for two more years.

"You either have to increase revenue, taxes of some sort, or if oil prices can recover. Or you can reduce expenditures, which has already been happening and you can continue to try and cut or turn to other savings accounts," Teal said.

In this case, that could be the Permanent Fund Earnings Reserve Account -- the same place the money for Permanent Fund Dividend checks comes from. The worry is that if lawmakers do the same thing to the Earnings Reserve as they did to the CBR, there is no third savings account and there would be no choice but to tax or reduce spending to get rid of the deficit.

"If we can't cut expenditures and don't have the revenue our deficit is $600 million. We're paying out a billion in dividends so the deficit can be filled by cutting dividends. But you know, nobody really sees that as a viable solution," said Teal.

While it's been the source of a lot of debate and disagreement, using money from the earnings of the Permanent Fund to help balance the budget is almost a certainty now. The question for lawmakers is how much?