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.