Commentary: Plenty of challenges for new legislators

This editorial appeared in The Anchorage Daily News.

Newly elected Alaska legislators may be saying to themselves today, "What did I get myself into?"

Oil prices have plunged by $80 a barrel, while the Permanent Fund has taken a $10 billion hammering, losing about a quarter of its value.

At no time in Alaska's history have lawmakers seen such a drastic weakening in both pillars of the state's economy at the same time. Oil prices are hovering around the level that will balance the current year's budget. Throw in uncertainty about whether Alaska can continue mainlining billions of dollars in discretionary spending from Congress, and you have major economic uncertainty.

No need to panic, but it is time to think ahead.

The good news is that legislators and Gov. Palin socked away $5 billion of the state surplus that rolled in while oil prices spiked to $140 a barrel. That's a good short-term insurance policy for the state budget.

The hammering taken by the Permanent Fund won't inflict a lot of immediate damage on the budget or state economy, either. Right now, the big losses are mainly on paper. If the fund rides out the storm without selling off holdings, the value of its portfolio has a chance to rebound as markets recover.

To read the complete editorial, visit The Anchorage Daily News.