ALASKANS SHOULD BE ALLOWED TO VOTE ON TAXES, PFD, SPENDING
Gov. Michael Dunleavy faces the same problem that stared former Gov. Bill Walker in the face: The state has hemorrhaged its reserves, and like a train speeding toward a wall, Alaska is getting closer to fiscal catastrophe.
The difference is that Walker never really faced “the wall” of budget limitations because he didn’t plan to cut the budget. He had too many public employee unions controlling him.
Instead, he “taxed” Alaskans’ Permanent Fund dividends by 50 percent, cut capital projects, and stopped paying tax credits owed to oil and gas producers. He ratcheted up spending on Medicaid expansion, and now more than 220,000 Alaskans are enrolled.
Must Read Alaska sat down with Dunleavy today to ask him why he took a different approach than tax and spend. Here are the notes from that meeting:
“Taking money from the average person by taking their Permanent Fund dividends, and proposing nine other different taxes — that didn’t work,” Dunleavy said. “If it worked, he (Walker) would be here.”
Instead, Dunleavy proposed to reduce the size of government and hold the people’s pocketbooks harmless — ensuring them whole dividends according to the traditional formula that existed before the Walker era, and no income taxes.
Dunleavy came into office with a $1.6 billion budget deficit handed to him by Walker.
But, he said, it wasn’t always like that. Government only grew that big once revenues were available during the high years of oil prices.
GOVERNMENT ALWAYS GROWS TO FILL ITS CONTAINER
“There is never enough tax money for government,” Dunleavy said. “What has happened since 1989 to about 2006, is that the rate of the growth in the Alaska budget was about 2 percent. Then, between 2007 and 2018, it just took off, with a big spike in spending.”
Dunleavy said that the $24-28 billion of funds coming from increased revenue and drained reserves over the past few years is now all but gone. The state has stripped $14 billion out of the Constitutional Budget Reserve.
But yet, there’s not a lot to show for it. The economy sagged, and people started leaving the state.
“We could have built numerous ports the size of Anchorage or put renewable energy in every village with that money, but that opportunity is gone,” Dunleavy said. People could have had work on these projects that would last for years.
Dunleavy is aware of the pushback against the cuts in spending. Everyone has a dog in the fight, it seems, whether they receive a senior benefit, or have a child in school, or even have a family member in prison who might be sent to a prison in another state.
But the exploding budget is a fairly recent occurrence.
“There is no evidence we can control spending on our own. Everyone agrees that even the Permanent Fund would be gone if there weren’t laws in place to protect it,” he said. “We had money. We spent it.”
CONSTITUTIONAL AMENDMENTS ARE KEY TO STABILITY
The addiction to spending is why Dunleavy is talking about a constitutional amendment — asking the people of Alaska to put a spending cap on government, because government has not been able to control itself.
Senate Joint Resolution 6 is a vehicle for the people of Alaska to stop the out-of-control growth of government, by making it unconstitutional to appropriate more during a fiscal year than the average appropriations made in the previous three fiscal years, by more than 50 percent of the cumulative change in population and inflation in the previous year.
Dunleavy wants to force the rate of government growth spending down to 2 or 2.5 percent per year, as it was before 2007. If he can push the budget back to $4.6 billion, and if the three constitutional amendments pass, the state will be a place where businesses feel more certain about investing.
In fiscal year 2006, the operating budget was about $4.7 billion. By 2013, the State had gotten about $10 million in general fund revenues and the operating budget grew to $6.42 billion.
But inflation during that entire period was only 17 percent and the state’s population grew just 9 percent. The budget grew by 30 percent.
“We have to rein in spending. History shows we blow through billions of dollars. Let’s put the constitutional amendment in place so we can control spending,” Dunleavy said.
Dunleavy is also keeping a campaign promise by putting the traditional calculation of the Permanent Fund dividend into the Alaska Constitution. That, too, requires a vote of the people.
A third constitutional amendment would prevent taxes from being imposed on Alaskans without a vote of the people.
“This is our one last opportunity to get it under control,” he said. He wants Alaskans to get engaged in the process, because the special interests — led by public employee unions — are already putting pressure on lawmakers.
“Will lawmakers — who asked for the people’s vote — now allow the people of Alaska to vote on constitutional amendments? If they are truly listening to the people, then let’s allow the constitutional amendments to go out for a vote and let the people decide. They will tell us if they want us to tax and spend. Or not tax and spend.”