A conversation with Mike Dunleavy - Must Read Alaska
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Friday, July 10, 2020
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A conversation with Mike Dunleavy

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.”

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Suzanne Downing had careers in business and journalism before serving as the Director of Faith and Community-based Initiatives for Florida Gov. Jeb Bush and returning to Alaska to serve as speechwriter for Gov. Sean Parnell. Born on the Oregon coast, she moved to Alaska in 1969.

Latest comments

  • The federal government actually taxes you PFD. I have no idea what “tax” means. It makes no sense to distribute Alaska’s resources so the feds can grab 10-30% so they can fund the EPA to harass us.

  • So lets cut education and the ferry system so everyone can get a full pfd that is not the right approach. Income tax only hurts the ones that work. Oil and gas gets all kind of breaks. But our kids pay the price.

    • Stop relying on government to raise your children. Supplement their brains with your knowledge. Public schools are meant to supply a minimum requirement.

      • The public school system in Alaska is broken. Any child that does not fit in the box – the same box built when the school system was CREATED – is simply thrown away. School to prison pipeline – Dept. of Education is under a two year (so far) CAP. Corrective Action Plan and face a plethora of further federal back lash if the failures continue.

        When the funding is cut from the school district, the alternative source is to refer children to Division of Juvenile Justice, funded through Medicaid and under the direction of HSS. When law enforcement gets involved, or charges are adjudicated through the court, the child is placed on probation.

        Schools refer any behavior deemed troublesome over to the JPO, which results in a probation violation. The school district, in turn is getting “rid” of any bad “data” – and therefore guarantee the avoidance of any further cuts from federal money.

        I wish we could stop listening to the obnoxious “pro-education” rhetoric. Every engaged parent wants their child to get an education. When faced with the task to help their child engage in learning, there is no follow through from the administration. Disclaimer: There are GREAT teachers in this state. Teachers that will undoubtedly leave this state if things continue to remain stagnant.

        Free thinkers? Not any more.

        I was encouraged to think outside the box. Now? They are taught to think IN the box, and ONLY in the box – Regardless of the changes outside of that dismal setting.

        The teachers (I’m assuming here, so you know where that leads) are sick and tired of teaching an entire generation of tech-savvy, socially awake students, who are distracted by the second via Wi-Fi. I cannot imagine the frustration. They are told how to teach, what to teach, and in what setting to teach – in a world that has COMPLETELY transformed.

        The numbers support this theory. I agree with Shelly that we have to take an active role, but there are systemic problems within Alaska’s public education.

        These kids and educators need advocacy. They need protests, they need legislative amendments to protect them from being turned over to DJJ for saying the word F***.

  • Go big Mike!!! You ran on cutting the budget and you are attempting to get people involved. All these special interests are screaming bloody murder and the local paper/rag is egging it on. So many people are not thinking that this is a process, not written in stone. Maybe when the dust settles, cooler heads will prevail. Stand fast Big Mike!!!!

    • Amen Brother!

  • For over a generation we had ATMs in Juneau and DC that allowed a massive level of spending without a personal income tax. Now the ATMs aren’t putting out as much cash so people dependent of the massive level of spending want an income tax. It would be one thing if our spending was being done wisely and we were receiving exceptional value for an exceptional level of spending, but we are not and we need to cut the wastage.
    I am all for the potential projects that the Governor reinstated but rightfully concerned that we do not know how not to waste money on projects. Seems involuntary. We need to avoid looking stupid, again.

  • This is a novel idea to only spend what you take in. The family budget is the same way if you don’t have the money then you don’t buy that new toy. Governments needs to be controlled by the people who vote not the special interest that have no interest in whether the government survives or not. Public Service Unions are an oxy moron. We the people are their Bosses not the other way around. Personally Public Service Unions should be outlawed. Another good Idea is allow the people control what the government spends not some Politician who is tying to buy the next vote in an upcoming election.

    • Amen!

  • Do any of the OMB folks he’s got working for him have any idea what the actual impacts of the various proposed cuts will be or are we just playing mumbley-peg with a razor sharp Budget Bowie knife?

    .

    Does the legislature get any guidance or are they expected to cram the various and assorted laws and constitutional Ammendments necessary to make the budget work in the remaining half of the legislative session AND analyse the impacts to their constituents in 6 weeks?

    • Everyone is waiting for Ed King (Gov.’s econ. guy) to show up with his thinking of what happens to our economy with these cuts.
      This should be a hoot!

    • Do you mean do we expect our elected representatives who campaigned and were elected to do a job to actually do that job? If so then yes, that’s what I expect. If they hadn’t shortened the session with all the tomfoolery they started it with they could have even showed up and started doing the work that they campaigned for and were elected to do.

      Our elected representatives can’t use a self imposed crisis of their own making as an excuse for not doing their job that they volunteered to do.

      • Steve-O, the work really only started after Gov. showed his budget BS (couple weeks ago). And note that the House got it’s house in order the next day.
        Legislature will do their jobs IMO (that they were elected to do)! And, I suspect, that those who supported Dunleavy are half-stepping on what they thought they were electing. His budget proposal has gone over like a lead balloon and it will only get worse IMO.
        Just wait till Ed King speaks. Heheh!

        • In your Liberal wet dreams, Yankee Diddle.

          • That’s yank my diddle, it’s a dandy!

      • The budget didn’t come out until 3 weeks into the session. Does the Governor have any interest in actual policy or is he abdicating that to the Legislature? I’d say he’s doing the latter. Sure, cut the H£ll out of everything but don’t throw you hands in the air when it comes to policy and consequences.

        Giving the biggest soapbox in the State a pass on leadership is cowardly. He volunteered for that job too.

        • Actually Bill Walker released the budget 19 days before the deadline, well in advance of the legislature even showed up in Juneau. The current governor made his changes to the budget that Walker submitted. It should be noted Walkers submitted budget spent more than his previous budget.

          You disagree with the Dunleavy budget, as do I but for different reasons. I disagree with the proposed Walker budget, but suspect you agree with it.

          • You make that argument as if there is any comparing the Walker budget with the Dunleavey budget. As if the House could have started “working” on the half dozen pieces of legislation necessary to make this budget work before it came out. Did they get issued a crystal ball by the OMB?

            .

            For someone who dislikes the Legislature as much as you do, I’m surprised to see such a willingness to be so dependent on their policies and process.

            .

            The budget? It’s DOA and nobodies gotten around to checking its pulse and calling it yet. I didn’t see any expansion in it for the legal defense of the education, healthcare and corrections lawsuits that would be incoming in July.

            .

            The Walker budget was more politically realistic but was putting us in a place where reserves would be gone in 2 years (last I checked).

          • So you think the house had nothing else to work on? You think they are at the beck and call of the governor and don’t serve independently of the governor?

            There is no comparison between the budgets, one drove us into the ground and the other tries to keep us from going under the aforementioned ground.

            I still have yet to see any new ideas from those who just want to keep spending until we run out of other people’s money. Do you think there is no where to cut spending?

          • I don’t know Steve-O are there some more sections of road that can have memorial corridors or bridges to be named?

            .

            The budget is the issue. That process has the Governor in the driver’s seat. Do you think he’s going to start setting some policy or is he going to wait on the Legislature to do that for him?

            .

            Other people’s money? You’re just goofy. Does the oil have Connoco-Phillips’ name on it or does it belong to the State of Alaska?

          • Also, I don’t have a problem with cuts. We don’t have a choice about cuts. What I do have a problem with are the so-called right wing army of gib-me-dats who want services and don’t want to pay for them.

            .

            You act like your owed a PFD and a plowed road. Embrace the bush living my dude and quit using the government subsidized internet, roadways and airports. If you were as fiercely independent as you let on you wouldn’t care how oil money got spent.

            .

            Galt’s Gulch is just a day’s walk in about any direction, help yourself.

          • That’s odd, you think I dislike the legislature and yet you claim they have nothing to do but name roads memorial corridors or bridges.

            Maybe you missed the last couple years but there’s been what has been referred to as a crime wave. SB 91 needs to be addressed, that is but one example of work the house should have been taking care of instead of the tomfoolery they were up to. And you call me goofy!

            I hope you have never received a PFD or the hypocrisy is thick with you. I don’t act like I’m entitled to anything, I expect our government to live within its means and not spend all of our savings on every last nice to have.

          • Rolling back SB91 is going to cost money. How will this affect your gib-me-dats? You having a hard time defending yourself Mr. Fiercely independent? You need the Po-po’s to hold your hand? As I said, goofy.

      • Budgets are not supposed to change laws. This one depends on that and Federal waivers to accomplish its bottom line. If SB57 ends up DOA as its likely to you can kiss another $400 million goodbye. If you want to complain about “tomfoolery” you don’t need to look further than the 11th hour budget delivered without comment from OMB.

        • Walker budget was meaningless, as the lame duck Walker intended only to make Dunleavy look as bad as he could to Democrats and Lefties as Waker closed the door and walked away looking for his soulmate Byron Mallott.

          • Ted, expert on meaningless budgets…..

  • Why does the Alaskan taxpayer owe tax credits to the wealthiest corporations in the world?

    • Earl, you need to go to school. These corporations won’t set up their corporations in any state that doesn’t INCENTIVIZE with a tax benefit to them, That’s called smart business. Those corporations don’t HAVE to do business here. Alaska invites them. Then, they decide. Take a business class, Earl.

      • The oil wasn’t the incentive? Maybe you should be the one going to a business class.

      • The big three have to be keep out of Alaska and replaced by the Chinese oil corporations. The Chinese corporations will not plunder the Permanent Fund and the Reserve.

        • Funny stuff.

  • Having gone from 3k a month to 927 dollars month over night due one has to choose to solve the issue or fail. Honestly it sucked. I cut and cut and made different choices. The first 8years were rough… Many times it seemed hopeless but I had a kid and a sick spouse. Quitting was off the plate. Going public housing route would have freed up money and made life easier and nicer but could we ever remove that crutch.in our future……….or would we get trapped in a generation quicksand of entitlements. We refused the crutch.

    Here is the hope after 8years of cutting and learning new skills there was light at the end of the tunnel. Now, it’s 16 years later and life is great. While I am not a Rockefeller we made it. My son is a man now and his skill set includes being able to make tough choices and seeking out how to pinch a penny tighter, and to save more than you think for an emergency and never to judge a person by their economic siduation.

    Mike …stand tall and stand FIRM. Long term results are going to be much better for our state population if we learn and live by better financial choices….it’s for the kids if that really means something to the dems and undocumented dems.

    • Amen. Thank you so much for sharing as you are a testimony of courage, resourcefulness and work ethic. We too have gone through similar and there is blessing in doing the hard things. Our culture has sadly become soft, complacent, and far too dependent.

      We are all in this together and we all need to ‘buck up’, tighten our belts and get creative. We can survive on far less and our state budget needs a serious reset. I commend Governor Dunleavy for taking the lead.

      • But with the new green deal from the AOC you can just do nothing and get a check! Isn’t that what America wants? Everyone just gets a job – or not. Either way, you just get a check, right? Wouldn’t that just make you feel so good inside? So accomplished?

    • Irish Lass…and that’s how it’s done!! Thank you for sharing. I admit I have not gone to business school but I did raise 5 children as a single mother without taking a dime from social services or free lunches in schools. It’s called making tough choices, working two jobs and yes, hardships! But we survived and now are able to live quite happily within our means! I believe the people in this great state are cabable also but are they willing?

  • The question we must necessarily ask ourselves is if we do nothing what will happen.

    1 The PFD will be completely seized, as in no pay out anymore, ever. When that money isn’t enough…
    2 Income tax, the income tax proposed under the last administration was between $200,000,000 and $300,000,000 this will only last a few days, then they will double it and get a few more days of spending. When that money isn’t enough…
    3 They will seize the Permanent Fund corpus itself.

    Think it won’t happen, half of number 1 has already been done and the ground work for number 2 has been laid.

    We don’t have a revenue problem, we have a spending problem.

    • For Pete’s sake Steve-O, your fear-mongering is unfounded. The courts have ruled that the PF earnings are to be appropriated by Legislature (elected by us). That’s not the case with the PF itself.
      You are wigging out here over perceived assumptions that have no basis in fact. The Legislature may very well appropriate away the PFD but that would be an extreme case to pay our bills IMO. Anything other than that would be political suicide to those attempting such IMO.

      • The Alaska Supreme Courtdid not determine the PFD had to be appropriated.
        What the court decided was that the cut by Walker and subsequent short funding by the legislature the following year was not unconstitutional.
        If Governor Dunleavy decides to follow the current statute and pay the full PFD according to the law, he likely can.

        • Thanks Joe, as your wording is clearer than mine. However, should the Legislature decide to fund less than the current statute allows it could prompt a veto. I suspect this issue will be looked at sharply and be a part of any veto-proof budget agreed to by Legislature.

          • Actually, Governor Dunleavy doesn’t need an appropriation to pay full PFD. The existing statute is all the authority the Hovernor needs.
            Because the funds to pay the full PFD are not in the treasury and instead in the separate Earnings Reserve Account, there is no obvious constitutional impediment to full payment.

          • Well Joe, should the Governor attempt to pay statutory PFD, over appropriations by Legislature, I suspect there would be a lawsuit. And Dunleavy will lose IMO.

  • We have the funds to fund ferries, k-12 education, etc with out stealing the property of Valdez, Fairbanks, and the Northslope.

    We actually have a surplus of 300 million.

    But the governor’s household plan is take our grocery and rent money and donate it to the federal government in the form of income taxes: this makes no fiscal sense. I want my benjamins spent here not in DC.

  • Maybe the Governor needs to get the Sesame Street cast of characters and muppets to explain things. Wouldn’t that be a hoot?! (The creative bunch in this venue could name some perfect folks to play those parts!) Then perhaps people could understand what is going on. Maybe put it to a rap video? Ken Federico said it above. Let’s get to talking. The Governor has it stripped down to a pretty gnarly low. Now we can start building on that to the survivable mode. The children won’t starve and go uneducated; SEAK will get their goods and services; the lights will be on in the villages…. but that gray, greasy, fatty part all nicely trimmed off.

    • Garnet-show me where the Governor has committed to not veto a revised budget back to his original and I’ll accept your logic. I mean puppet show.

      Till then I just assume our Governor will follow through on his plan to take our resources and send a large proportion (in the form of federal income taxes) to D.C.

  • How about the fact that the Governor’s live “within our means” budget only actually includes $721m in cuts?!! The rest comes from raiding the Constitutional Budget Reserve savings account ($172m), other ONE-TIME accounts ($350m total) and stealing from local fish and oil property taxes ($450m).

    Yes, this budget includes big cuts (schools, healthcare, ferries), but even the Governor knows he won’t be able balance the budget without looking at the oil industry payouts, PF earnings, and other taxes. Wake up!

  • Our school results are worse than a national embarrassed!!!!!

    Then recognise that we pay more than any other state to produced this dismal failure.

    Wasting money and tossing money at issues is never solution .

    Do more with less by using our brains, rolling up our sleeves.

    Here is a waste….. Sweat shirts for students for going thru an earthquake ….a waste of school funding …
    Yet students got them. Really

  • I’m all for balancing the budget but not by doing it by cutting the heart of Alaska in ways that will cripple its children, natives, recovering addicts, healthcare and ferry commerce. There is a missing piece to this puzzle – I don’t know enough about the oil/DC/corporate game to know exactly what it is but that is where we should be cutting.
    The argument about spending high amounts on education that doesn’t yield high test scores so therefore we should cut their funds by 25% is naive and thoughtless at best. We have one of the most diverse school districts in the nation! That means we have more children coming to school that don’t know English or speak English at home then any other state and therefore we need aides supporting teachers at school especially in K-2 so that when their teacher says write your name they don’t just sit there. We also have the highest rates of sexual assault and domestic violence in the nation so when a child comes to school and is shut down and laying on the floor instead of learning because they were beat that morning and watched their mom get beat the night before and didn’t sleep much between the beatings, they can be nurtured by a teacher with 20 kids in her classroom instead of 35 and they can receive intervention from mental health staff on sight ….so would higher test scores by ideal? Yes! But we need to fund the basic needs in our schools for those kids to have any chance of even getting up to base level and not become illiterate/homeless/addicted/drop outs…the ripples will be beyond catastrophic if our governor cuts education and other essential core needs of Alaskans. Cut the fat off of oil companies /corporate…not off the heart. I’m willing to pay income tax. Why don’t we have a sales tax? There is something missing in this balanced budget equation that he’s not telling us to be cutting at the heart…

    • Sarah, kids that do not speak English as a first language is not a comparable excuse as to push further spending in our state. There are school districts in the lower 48 with diverse populations as well (think LA, Chicago, San Antonio, Miami) as they’ve figured out how to educate children effectively despite English being a second language. It’s not the dollars spent in the actual classroom that bugs people, it’s the amount spent on what NEA has negotiated throughout our Alaskan community to fund the lavish spending at administrative levels, not at the teacher/classroom level. Between $20 million schools built for 50 kids in a rural community, to an exorbitant rise in health care policies for education staff, the burden is too much to bear. The state can’t keep handing fistfuls of dollars to districts in this way, it hasn’t been effective. School districts need to spend the dollars more wisely and more effectively, in the classroom. Not on benefit packages fancy new school buildings.

  • Counting the Dividend ($1 billion) – last year the Legislature appropriated $2.7 billion from the PFER and $0.7 billion from the CBR to balance the budget. Now that we consider the PF Earnings as revenue, that means our “deficit” was the $0.7 billion from the CBR (which is “borrowed” and required to be re-paid) in order to pay 70% of the Dividend funding. We would have balanced the budget if the Dividend last year was only $500.

  • The claim that there was a big spike in spending is just false. Let’s just take the author’s own numbers. Between 2006 and 2013 there was 9% population growth and 17% inflation, and the operating budget in 2006 was $4.7B. Well, 1.09 x 1.17 x $4.7B = $6.0B as the expected number for the 2013 operating budget, simply accounting for inflation and population growth, not too far from the actual value of $6.4B. If one goes to the usgovernmentspending.com site that is used for the graph in the article, then you find that one category, “Health Care” spending, went from $1.2B to $1.83B during that period, a 50% spike that coincides exactly with passage of ObamaCare. If you take away that category, then you will find that all other categories of state spending are pretty much at or below what would be expected after accounting for inflation and population growth. By the way, the graph shown above in the article combines all state and local government spending in Alaska. When you look at the math correctly one of the problems for Alaska becomes immediately apparent. A typical government revenue source, such as a sales tax, tracks with both population growth and inflation, so it is relatively easy to maintain a static level of government services. The same cannot be said for the revenue source of taxes on oil production.

    • HELLO! Pluto to research professor! We have a room ready for you. Please give us your arrival date.

  • Garnet, finally someone (you) has shed some light on where we are and what might be expected from here. Given the topsy-turvy maneuverings in the House, our Gov is declaring a gallant and bold approach to the truths of the day. Thanks for your comments .They are spot on.

  • What Dunleavy is saying: Democrats have hooked us on the drug (spending) and now that that drug is too expensive to purchase, we can steal (taxes) to pay for it; taper (reduce spending) to get us off of the habit; or, go cold turkey and kick the habit completely (balanced budget). So all you drug addicted Democrats: get used to these budget cuts because Dunleavy means business, and he’s not backing down or going away.

    • There are plenty of Republicans addicted to spending, party affiliation doesn’t preclude some one from being a believer in big government.

      • Yes, Steve’o. They’re called RINO’s and we are going to toss them on their asses. Notably, Lisa Murkowski.

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