By TOM BOUTIN
A balanced budget is the most durable fiscal plan for any state, any government. For that reason I am more optimistic about the economic future of Alaska because of efforts to reduce state spending, including the ongoing veto process.
Throughout the 2018 election I understood that, if elected, Michael Dunleavy would do everything possible to balance the state budget at a lower level than the 2019 budget. During the campaign season I carried with me a table from the Legislative Finance Division that showed 2019 spending to be 13.4 percent higher than 2018, and I spoke to people about that, correcting media reports that the state budget had been reduced.
Going door to door last year I found people angry that the operating budget had grown at all, that it had grown so large, and that the PFD amount no longer relied upon the statutory formula.
Claiming the state budget has been reduced while total spending consistently rises has not worked, obviously. It has brought us the Goose Creek prison debt, the Constitutional Budget Reserve liability, the Permanent Fund dividend mistrust, and most recently temporary suspension of the Power Cost Equalization electricity subsidy. Billions of dollars are gone forever.
The 2020 budget, if the vetoes return to become law, is the first honest budget reduction – ever. Gov. Michael Dunleavy’s fiscal plan is the clearest plan of any governor since I first arrived here in 1973.
Yes, lower state spending will be felt by the retail and service sectors, mostly in the near term. But the first, best hope for the Alaska economy and for Alaska producing enough goods and services to allow 700,000 Alaskans to continue our high level of aggregate consumption is not a new or expanded state program. It’s a balanced state budget.
The amount of goods and services Alaskans produce for sale to the rest of the world has not kept pace with increases in aggregate consumption nor with government spending. I believe production will rise in the mid to long-term once the annual budget conundrum is fixed and annual state spending matches recurring revenues.
Quality of life is not derived from government. If it was then our current level of spending would have solved instead of grown our homelessness problem. Alaska prisons would be empty and we would have no drug problem. Our high school students would all qualify for free-ride scholarships at Ivy League colleges.
The Alaska experience is solid proof that spending cannot provide satisfactory outcomes in education, health care, drug dependence and crime. We are the example – the worst case scenario – cited by opponents of irresponsible state spending. If left unchecked state and municipal government can displace and discourage basic industries, and that is the always overlooked upside to spending reductions when economists paid by government react to balanced budget proposals.
By almost any measure creating a tension between the PFD amount and the state operating budget has not worked as intended. It didn’t help that the contrivance was preceded by inaccurate claims of budget reductions. If we don’t first ask the voters to decide I think there is every likelihood they will pass their own ballot initiative.
Advocates for bigger spending never address the economic losses that come from spending down savings. In the particular case of health care, lobbyists conveniently avoid mentioning the rampant abuse, fraud and waste. As a taxpayer I hope to see year over year reductions in Medicaid subsidies, at least until I see a TV news story featuring someone wearing a prison coverall while talking to a judge about that Beaver full of building materials that crashed when Medicaid was paying the charter.
The only way to honestly and conclusively address and resolve the annual state budget conundrum is to reduce spending. Taking the process away from special interests in Juneau will help and the vetoes recalibrate state spending to head in that direction.
Past political impasses in the legislative branch were resolved by spending more money. Hold-outs to legislation and policy caved once extra programs and projects dear to them were funded. That is how we got here today with our wants portrayed as needs and consumption much too high for what we produce.
In this strong-governor state a balanced budget can and should eliminate the political solutions achieved by spending more money, which is where we are today. Solving our political arguments by exacerbating our fiscal problems worked better at 2 million barrels per day than it does now. The best outcome for the Alaska economy is a balanced state budget and those 182 vetoes were honest progress in that direction. I hope we see them again. Don’t bet against the honest man in the room.
The Alaska experience is proof that spending record amounts on food stamps increases participation in the program, destroying self-reliance in the bargain. The Alaska experience also proves that spending record amounts on education decreases performance on standardized tests. At this unsustainable level of governmental spending we have seen crime in our cities grow exponentially, education results plummet, homelessness expand in every city, and the University of Alaska begin to lose accreditations.
Anyone can easily conclude that dollars are not the solution, especially when filtered through government, but I think we can go even further and admit that too much spending has exacerbated our social ills. If it’s true that we would have a more robust private sector were the government footprint smaller, it’s probably also true that there would be greater adult workforce participation, and therefore Alaska would actually have fewer homeless people.
For that reason I believe that over the mid- to long-term a lower operating budget will lead to increased employment, a more balanced economy, and a healthier state.
Tomas Boutin lives in Juneau. He has worked 40 years in the private sector and 18 years in state government.
A voice of reason in the wilderness!
Thanks Tomas
“Quality of life is not derived from government. If it was then our current level of spending would have solved instead of grown our homelessness problem. Alaska prisons would be empty and we would have no drug problem. Our high school students would all qualify for free-ride scholarships at Ivy League colleges.”
+1
Could you explain the corellation between growth in State government and how it does anything besides stimulate the private sector? It would be fascinating to hear how State taxes are crushing the citizens and businesses in Alaska. Should citizens and stakeholders be asked to participate to support the civilization they live in or not? If they don’t, are they really citizens or stakeholders at all?
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I’m in favor of cuts. I’m also in favor of sane correlation to base Alaska upon and not the cargo cultism that believes a hole in the ground will supply all our needs. Or that government is a universal evil. Eisenhower’s Interstate system would be exhibit A.
This.
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What do people believe will happen when the oil runs out? There are some good ideas out there — this is a good launching pad to get into space, we could be serving industries — like data centers — that have problems with cooling. But to have any of this stuff requires: a) education and b) infrastructure
Also ignoring the plethora of ways our society is being socially engineered by the left, from our broken immigration and welfare policies to the wreck they insist constitutes education can’t be ignored. Our culture is melting down, some of this is due to government sponsorship, but I would argue that is symptom and not primary cause. You don’t care about truth if you are blind to demographics.
SURELY(!!!), we can’t tax and spend our way to prosperity. FINALLY(!!!), we have a Gov and Administration with the right mindset to reduce the size of State Gov’t and reduce spending. MAYBE(!!!), we can alter the “disastrous” course from past Administrations, set our current path to sustainability, identify inefficiencies – wastes, and work on initiatives to entice investment in AK (putting people to work).
Spot on. The sooner we get to equilibrium, the sooner our economy will grow and the sooner people will have confidence to risk capital. The longer and larger the disequilibrium, the worse will be the eventual correction.
Tom and I served together in the Murkowski Administration. We were both part of a group of appointee/manager types that used to meet for lunch every week at Bullwinkle’s Pizza across the street from the SOB in Juneau where we solved all the State’s problems.
I mostly agree with Tom here. The actual size of the government isn’t much larger than it was when we were in government together a decade and a half ago, but it is one Helluva lot more expensive. Part of it is that State employees make almost half again more than they made when we were in government, but most of it is increases in Education and Social Services spending.
At one time we just floated the idea that we prohibit DHSS from paying for First Class and Y-Fare tickets except if there was a medical emergency and that was the only fare available. The Left and the Medicaid constituency erupted in cries of RACCCCIIIIISSSSTTTT! There is no excuse for a 1st Class ticket for a medical appointment unless it is an emergency and that is the only seat. In twenty years of State travel, I flew 1st Class ONE time at State expense, and that was because the hearing was set, and that was the only seat available. (And before some lefty recalls how they often saw me in the Board Room and in First Class; the Board Room membership was on my dime and the First Class seat was on miles because I usually ran up 100K or more miles a year on State business.) One Helluva lot of State-paid medical travel is nothing more than medical tourism. Get a dentist appointment in Juneau, Anchorage, or Fairbanks, get a Y-Fare, maybe go to the dentist, maybe not, go shopping and partying until you drop and then go home. As Tom points out, that crash with a plane full of building materials was a Medicaid charter. I flew all over rural Alaska for several years for the BIA; I can count on my fingers the times I needed a charter. The reality is that nobody in DHSS in Juneau, Anchorage, or Fairbanks knows a thing about rural travel. The other reality is that very, very few people in road system Alaska knows anything about Alaska off the roads. Maybe one day we will create some Inspector General positions and put some people in jail for fraud.
Anyway, I disagree a bit with Tom in that State spending does generally go into the Alaska economy. Probably more of a State employee’s wages goes into the economy than does his/her Permanent Fund dividend. Unless you’re poor, the PFD is mad money that you use to buy toys or vacations; that money mostly goes Outside. We put half of our kids’ PFD in college savings, which they immediately cashed out and blew on toys when they turned 18. We’re a State of “Trust Fund Babies.”
What we need to stop doing is spending more than we take in. I don’t give a damn about Vince Beltrami’s union dues income or some million dollar a year healthcare administrator’s income. Right now public policy, specifically budget policy is being dictatef by the unionized public employee racket, the education racket, an overlapping set with the union racket, and the big one, the healthcare racket. Sometime after I retired, the federal government shifted its responsibility for the Indian Health Service, a Constitutional obligation of the federal government, to the States and the Medicaid program. Maybe our Congressional delegation should do something to make the US shoulder its obligations rather than push them off to the states.
Thanks to Must Read Alaska for putting this piece out….it is well written and should see print in some of Alaska’s major news papers and reported on the State wide TV news outlets….we have been on the wrong path for a long time now and this governor has taken steps to turn things around, thanks God !!!!
Pretty standard boilerplate.
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Why do you think it is that Norway — which has the same challenges we do — spends much, much more per citizen but has a sovereign wealth fund worth over a trillion?
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Hint: it’s not because they reduced government spending.
Tomas, your comment “If it’s true that we would have a more robust private sector were the government footprint smaller, it’s probably also true that there would be greater adult workforce participation, and therefore Alaska would actually have fewer homeless people.” is telling in that you say “If it’s true.” You go on to make your conclusion based on this “if” and of course you conclusion is bogus if “it’s not true.”
While you are the expert on your opinion, that’s all it is and without something to support your bit about a “more robust private sector were the government footprint smaller,” your opinion has little clout IMO.
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