Investor Presentaiton

millions of dollars Spending as much as—or more than-we earn. For most of the 1990s, the State of Alaska's expenditures were higher than its revenues. The State paid for the difference by taking money out of a special savings account that the legislature had put aside. Until several years ago, a lot of people worried about what we would do when that savings account ran out of money: it looked like we would have to cut back on state spending, raise taxes, or reduce dividends. When oil prices and oil revenues increased dramatically the past few years, people stopped worrying about that problem. We started spending a lot more money-but luckily we also saved a lot of money, particularly since 2008. State "General" Expenditures and General Fund Revenues 6000 5000 4000 3000 2000 1000 0 FY78 FY80 FY82 "General" expenditures General fund revenues FY84 FY86 FY88 FY90 FY92 FY94 FY96 FY98 FYOO FY02 FY04 FY06 But people are worrying again. Even if oil prices stay high, if oil production keeps going down, eventually state oil revenues will go down. And cutting state spending won't be easy. When you hire more troopers and teachers and University faculty, give public employees pay raises, build more public facilities that need to be maintained, and so on, it's hard to cut back. We may soon be back with the same old problem of spending more than we are earning, and dipping into savings which could run out in a few years. 41

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