Alaska Has Three "A's" Its Name and Now, So Does Its Credit Rating

At Conservatives4Palin, Stacy Drake wrote a piece last summer following our nation's credit downgrade indicating how the fiscal environment of Alaska was stable enough to allow Moody's (one of the three main credit ranking agencies) to upgrade Alaska's credit rating in November of 2010. Today, another credit rating agency, Standard and Poor's upgraded Alaska's credit rating to its highest possible rating of AAA. The agency gives several reasons why it felt confident enough in Alaska's fiscal climate to make such an upgrade. A few of these reasons are due directly to the policies implemented by Governor Palin:

*The state's strong financial management and generally conservative forecasting 

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*The state's financial flexibility, enhanced by the maintenance of large reserves derived from windfall oil revenues since fiscal year 2008 

*The state's moderate debt burden 

*An accumulation of multiple budget reserves equal to more than 200 percent of the general fund budget 

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*Extensive forward‐funding of significant areas of the state's operating budget, a practice that could be halted in an underperforming revenue environment 

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* The aggressive steps the state has taken to reform its pension and retirement systems, which will limit the accumulation of new liabilities

The state's strong financial management and generally conservative forecasting:


Governor Parnell has largely been a fiscal conservative during his time as Governor so far, but indeed Governor paved the way by cutting budgets by nearly 10% and reducing earmark requests by more than 80%. This is "strong financial management


The state's financial flexibility, enhanced by the maintenance of large reserves derived from windfall oil revenues since fiscal year 2008:

One of Governor Palin's signature pieces of legislation was ACES--Alaska's Clear and Equitable Share--which revamped the corruption tainted oil tax legislation of the Murkowski administration and was implemented during fiscal year 2008. While it is a misnomer to characterize such revenues as "windfall", they have provided financial stability to the state. As Alaska's state constitution notes that the people own the natural resources, so such a tax is better classified as a severance or production tax paid by the oil company as a recompense for extracting the irreplaceable citizen-owned state resource. Nonetheless, the changes to the oil tax structure has increased the revenues that the state has brought in, while at the same time providing record number of oil jobs and oil companies investing in the state.

The state's moderate debt burden: 

During her time as Governor, the debt of Alaska increased at a much slower rate than all of the governors currently seeking the GOP nomination for president and a the debt was actually lower than under her predecessor's administration.


An accumulation of multiple budget reserves equal to more than 200 percent of the general fund budget:


Due to legislation like ACES and the frugal budgeting of Governors Palin and Parnell, Alaska now has a 12 billion dollars in savings. During the VP campaign, Governor Palin was able to tout a more than $5 billion surplus.  While many states are wallowing in budget deficits, Alaska is facing just the opposite. 


Extensive forward‐funding of significant areas of the state's operating budget, a practice that could be halted in an underperforming revenue environment  


One of Governor Palin's key items when she ran for office was forward funding of education using the budget surplus, which she implemented to the tune of a billion dollar early in her term, and this is a practice that Governor Parnell has continued. This kind of budgetary practice not only enables schools to be able to have flexibility and foreknowledge of their fiscal situation, it also provided the stability to fiscal future of the state, as roughly 10% of the state's budget is devoted to education. 


The aggressive steps the state has taken to reform its pension and retirement systems, which will limit the accumulation of new liabilities:

During her tenure, Governor Palin reformed pension and retirement systems, which lead to a reduction in liabilities of 34.6% during her tenure. Governor Palin noted in a Facebook post over a year ago that her pension reforms and other fiscally prudent measures have contributed to Alaska's fiscal health:

My home state made the switch from defined benefits to a defined contribution system, and as governor, I introduced a number of measures to build on that successful transition, while also addressing the issue of the remaining funding shortfall by prioritizing budgets to wrap our financial arms around this too-long ignored debt problem. When my state ran a surplus because we incentivized businesses, I didn’t spend it on fun and glamorous pet projects for lawmakers – though that would have made me quite popular with the earmark crowd. In fact, I vetoed more excessive spending than any governor in our state’s history, and I used the state’s surplus to bring our financial house in order by paying down our unfunded pension plans that some other governors wanted to ignore. This fiscal prudence didn’t make me popular with the state legislature. In addition to vetoing hundreds of millions of dollars in wasteful spending, I put billions of dollars into savings accounts for future rainy days, much like most American families do in responsibly planning for the future. I also enacted a hiring freeze and brought the education budget under control through a commitment to forward-funding. I returned much of the surplus back to the people (it was their money to start with!) through tax relief and energy rebates. I had proven as the mayor of the fastest growing city in the state that tax cuts incentivize business growth, and though the state legislature overrode some of my veto cuts and thwarted an additional tax relief request of mine, the public was supportive of efforts to rein in its government.

This bodes well for Alaska's fiscal health, especially when many states are swimming in debt and unreformed pension programs (my state of Illinois now has the worst credit rating in the country). It also provides another feather in Governor Palin's cap which provides continued vindication regarding her wisdom, intellect, political foresight and boldness.Should she seek elected office again in the future, she'll indeed have much to point to in the way of leadership and fiscal prudence. 


 Crossposted here and here.