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    Entries in Alaska (5)

    Friday
    Jul152016

    The Week in Public Finance: Unbalanced Budgets, Alaska's Tax Battle and Creditor Complaints

    A roundup of money (and other) news governments can use.
    BY  JULY 15, 2016

    Unbalanced Budgets

    Fiscal 2017 isn't starting off so well for some states.

    In Mississippi, officials announced they need to withdraw up to $63 million from the rainy day fund to cover declining revenues that left it with an $85 million budget shortfall. The announcement came just two days after the legislature removed the state’s restriction on how much it can withdraw from the fund in any given year. It reduces the state’s savings to just 1.4 percent of its general fund budget. Both moves drew criticism from Moody’s Investors Services.

    Pennsylvania this week was placed on a credit watch by Standard & Poor’s rating agency for passing a budget that failed to offer a spending plan for more than $1 billion of it. Lawmakers eventually agreed on a revenue plan, but it still requires borrowing more than $200 million from a separate state fund.

    Moody’s also criticized Kansas this week for yet another shortfall. We recently mentioned that Kansas is one of four states in a recession, according to federal economic data. Its total tax revenue was more than 7 percent short of what it expected for fiscal 2016. The state has struggled to meet its revenue expectations ever since lawmakers approved income tax cuts in 2012 and 2013.

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    Friday
    Jun102016

    The Week in Public Finance: Punishment for Illinois, Budget Battles and New Jersey's Win

    A roundup of money (and other) news governments can use.
    BY  JUNE 10, 2016

    A Battle Over Illinois’ Downgrade

    Illinois was downgraded this week to two steps above junk status by Moody’s Investors Service. The downgrade is largely due to the state’s inability to pass a budget for the past year and a half. A political stalemate has crippled lawmaking in the state and Illinois -- already the lowest-rated state -- is being docked now with a Baa2 rating. The state’s current budget gap has only worsened over the past year. The structural budget deficit, including what Illinois is supposed be spending on pensions but isn’t, amounts to 15 percent of total general fund expenditures, Moody’s said. A day after the Moody's downgrade, Standard & Poor's also downgraded Illinois.

    Apparently unperturbed by the fact that its overwhelming debt is what got it into this pickle, Illinois plans to borrow a half-billion in bonds later this month. The downgrade will likely increase the interest rate Illinois will have to pay on those bonds and impact the state’s outstanding $26 billion in debt.

    Not long after the downgrade, the world’s largest money manager said investors should boycott Illinois’ upcoming sale.

    “We as municipal market pa

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    Friday
    May272016

    The Week in Public Finance: Special Sessions, Chicago's Pension Deal and a Historically Giant Tax Break

    A roundup of money (and other) news governments can use.
    BY  MAY 27, 2016

    Special Session Begins in Alaska

    After failing to agree on a budget for the 2017 fiscal year, Alaskan legislators met this week to begin a special session. The state is one of a handful that has yet to pass a budget for the upcoming year, which starts in five weeks for most. But Alaska is arguably in the toughest position.

    Lawmakers extended their regularly scheduled session but still failed to decide how or whether to enact fiscal reforms that would close its structural budget deficit. According to Standard & Poor’s, the continued “impasse risks a government shutdown starting on July 1 when the state's new fiscal year begins.”

    The cause of Alaska’s woes is simple: The prolonged drop in oil prices has hammered its budget, which largely relies on oil revenue. To meet expenses, the state has drawn out of its substantial rainy day fund over the past two years. As a result, its top AAA credit rating was stripped away in January.

    The solutions, however, are not so simple. Gov. Bill Walker wants to completely revamp Alaska’s revenue system, which includes implementing the state’s first income tax in more than three decades and significantly reducing the annual stipends that residents receive from oil revenue. Instead Walker wants to funnel more of that revenue into a new state investment fund to support the budget. Still, legislators disagree about how many -- if any -- of those proposals to adopt, and many still want to tap into the state's rainy day fund again to balance the budget.

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    Thursday
    Mar102016

    Q&A With Gov. Bill Walker on Fixing Alaska‚Äôs Finances

    The former businessman talks about betting his political career on fixing the Last Frontier’s finances.
    BY  MARCH 10, 2016

    Alaska Gov. Jay Hammond and others knew all the way back in the ‘70s the dangers of relying financially on a finite resource. So when oil money began flowing into state coffers, Hammond and the legislature created in 1976 the Permanent Fund, which gets a share of the state’s oil revenues every year. The fund was seen as a source of income for when the oil ran out. Lawmakers can’t touch the initial investments -- just the earnings, which get divvied up and distributed annually to every resident who receives about $2,000.

    “You have to remove the money,” Hammond said in 1980. “Put it behind a rope where you cannot utilize it for flamboyant expenditures.

    Today Alaska still relies on oil revenues to fund most of its day-to-day operations, but nearly two years ago, oil prices began steadily declining. Since then, the state has withdrawn more than $6 billion from its substantial reserves and cut $1 billion in spending to close budget gaps. Last week, Moody’s Investors Service became the second ratings agency this year to strip Alaska of its AAA rating.

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    Thursday
    Feb042016

    How Oil States Are Dealing With Sinking Prices and Revenue

    The states most dependent on oil tax revenues have different ways of dealing with the industry slowdown.
    BY  FEBRUARY 4, 2016

    Oil prices are now at their lowest level in 12 years -- below $30 a barrel. That's great news for consumers, but not for the states that depend on oil tax revenues.

    The falling price of oil, which has declined more than 60 percent since June 2014, has some states scrambling. With no end in sight, states that are more dependent on the industry simply can't replace the revenue by withdrawing from their substantial rainy day funds.

    Oil, natural gas and mining account for about 10 percent or more of gross domestic product in eight states: Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, West Virginia and Wyoming. Last year, total tax revenues in the eight states declined by 3.2 percent, according to a new analysis by the Nelson A. Rockefeller Institute of Government. In contrast, the remaining 42 states reported a 6.5 percent increase in total tax revenues.

    Although most of these states tend to budget conservatively, the good years for oil had an impact on their finances.

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