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Wednesday, October 23, 2019
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The Big Reveal: Budget built from bottom up

THE BUDGET WILL ARRIVE WHILE HOUSE IS IN DISARRAY

When legislators receive the governor’s budget on Wednesday morning, all bets are off for organizing the House of Representatives.

Even though it will be Day 30 of a House without a Speaker or committees, it’s going to be every legislator for himself and herself.

There will be so much to digest in the completely revamped budget that Republicans in the House will look disorganized and unprepared on their messaging. They won’t be able to speak with one voice.

Democrats, on the other hand, already have their press releases ready, and they’ll say that the Dunleavy budget is the meanest budget ever to be proposed. They’re ready for war over the budget. This is why they played Rep. Gary Knopp for the past few weeks, while ensuring that Republicans dithered away their chance to be a united force.

[Read: When you come to Juneau, the only thing you have is your word.]

The budget will be $4.6 billion, which is $1.6 billion less than Gov. Bill Walker’s proposed budget. It is a 28 percent smaller budget than the Walker budget.

This can only mean an entire restructuring of government, and many, many programs will be lopped off in the process. It’s a return to a budget the size that Alaska had 14 years ago. Back to basics.

Each of those soon-to-end programs has a constituent. Each constituent comes with an organized trade association, a lobbyist, and a strategy — however strong or weak — for keeping itself from the grim budget reaper.

Public broadcasting? It’s got a big and noisy constituency. But no more so than education, and no more so than Medicaid. The noisy competing interests will descend, and at times be very loud.

“What we’re doing with this administration is we are building a budget from the bottom up, from zero up. We’re going to build that up to where we reach our revenues,” Dunleavy said.

The Dunleavy Administration didn’t start by cutting. Instead, it started with core ideas about what government should fund and how much money is available to fund it:

  • funding cannot exceed existing revenue;
  • the focus should be on core functions that impact a majority of Alaskans;
  • state reserves must be protected;
  • no taxes on Alaskans and no taking their Permanent Fund dividends;
  • government should be sustainable, predictable and affordable.

Under the current revenue that is expected, government will do less in the future, because it has less money. The only money available, beyond current oil revenues and the Permanent Fund structured draw, is through taxes or the Permanent Fund. Dunleavy doesn’t want to use either of those.

“You’re going to see a whole slew of different approaches to not just budgeting but in services and what can we do as [the] state of Alaska in terms of enlisting the private sector,” he said. 

Health care, which was a main focus of Gov. Bill Walker’s tenure, did not make the list of what government should guarantee. The Medicaid program will likely be dramatically transformed, and shrunk. One in four Alaskans uses Medicaid, but it’s a program that has no cap, which means it tends to expand continuously, lacking any incentive to be more efficient.

Medicaid is also prone toward fraud. Fraud, waste and abuse account for about 10 percent of the payments made by Medicaid, which equates to millions of Medicaid dollars annually being fraudulently billed in Alaska.

The  budget focus is on public safety, education, management of resources, and infrastructure.

Where the private sector can pick up services, that’s the “open for business” part:

Ferries are expected to be dramatically trimmed, opening up major opportunities for private carriers around Alaska’s coastal cities to fill in where publicly subsidized ferries have prevented private sector enterprises.

Services for seniors may need to be privatized. This opens up business opportunities, once government is not filling the need. Prisoners may need to be sent out of state, where it doesn’t cost as much to house and feed them.

The governor has already said he is not going to propose taxes to patch the hole. He’s not proposing to take more from the Permanent Fund.

“I believe government is best if it’s kept small and focused and out of the lives of people. That’s what I truly believe,” he said.

WHAT HAPPENS NEXT

This process is a discussion and the governor will open up that discussion on Wednesday at 10:30 am, during his press conference.

The Legislature will likely want something different when they see the budget on Wednesday.

Each of the 60 legislators will have an opinion about what to add back into the budget. They will not bring their red pen to the budget, but many of them will bring a list of must haves:

  • Coastal legislators will will say that the Alaska Marine Highway System can’t be eliminated.
  • The Fairbanks legislators will say the University of Alaska budget can’t be  smaller.
  • Public school advocates will say that education funding must not only be preserved, but grown.

All stakeholders will be fighting to grow the budget back, and all will be lobbying in the halls of the Capitol.

This will occur at the same time the House is attempting to organize with a Speaker, Rules Chair, Majority Leader, and Finance Chairs, something the House has been unable to do for 30 days.

The result of the organization that ensues may be that no caucus will form that does not require caucus members to vote as a group on the budget.

More likely, over the weekend a group of legislators who simply oppose the budget will form up as an opposition caucus to add dollars back. They’ll just struggle to answer the question: “Where do you plan on coming up with the money?”

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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

  • “Ferries are expected to be dramatically trimmed, opening up major opportunities for private carriers around Alaska’s coastal cities to fill in where publicly subsidized ferries have prevented private sector enterprises.”

    What?

    Maybe we should stop having D.O.T. plow our highways, let private companies do it, and then let them charge us tolls for their use? After all, it would open up tremendous opportunities for private sector companies.

    The ferries are a highway system for coastal Alaska. There are no private carriers who want to do what the ferry system does. And none have the funds or will to ramp up from square one and recreate the existing system. The loss of trade and commerce facilitated by AMHS will be a tremendous blow to Alaska’s economy.

    • If we let contracts with the massive subsidies we throw away on AMHS, we would have operators falling over themselves trying to get the job. When you have high school kids work for 20 years on the boats and retire as millionaires at age 40, there might be something wrong with the operation.

      • Wow… powerful… because it is simple and truthful.

  • An interesting angle on the AMHS would be to remove it from interstate commerce. John Torgerson did a back of the matchbook calculation one time that we could save money and let anyone with an Alaska driver’s license ride free if we stopped serving Prince Rupert and Bellingham. Remember, the World was going to end if we moved from Pier 48 in Seattle to Bellingham; Alaskans wouldn’t be able to get around the Lower 48 from an out of the way spot like Bellingham. The math on that was done using the then current fleet of US bottoms equipped to SOLAS standards. If we could buy vessels on the open market and equip them only for near coastal operation and get them for maybe half what they cost today. Tustumena is near the end of her days, but Kennicott is blue water capable and can replace Tustumena. Keep the new near coastal vessels under 1600 tons and eliminate the high licensure and pilotage requirements that dramatically increase crew costs.

    In my time with the State I learned to deeply distrust the Department of Law. They are at least as likely to serve the interests of some particular attorney or some political faction as they are to serve the interests of the State as a whole. I don’t have detailed knowledge of the whole Wickersham controversy but I think it is worth revisiting the question of why a State-owned vessel plying State waters is subject to the Jones Act. We could also visit why a State-owned vessel in State waters has to be an “inspected passenger vessel” as that term has meaning for licensure and USCG authority over the vessel’s design.

    And finally, whatever configuration we wind up with for the AMHS, we need to stop recruiting management personnel from the Navy, USCG, and other Jones Act shippers because they have no thought for efficient and economical operation of a vessel. There are plenty of good contractors out there that manage ships for companies all over the World and just as we just threw in the towel on DHSS management of API after decades of mismanagement, it is time to throw in the towel on DOT/AMHS management of the ferries after decades of mismanagement.

    • AMEN!

    • As a retired Coast Guard Marine Inspector…………..you don’t know what the hell your talking about.

      • As a retired inspector, your opinion is predictable.

      • As somebody who was deeply involved in running that system, I don’t give a damn what you think.

    • Maybe we are better off with you staying out of the administration Art, allowing you to say what needs to be said, with the credibility that your experience brings and your ability to reduce current affairs down to understandable language. You are a valuable communication asset for all Alaskans. Thanks for translating!

  • Thnx for reporting. It is good to know this is not a real 28% cut. Cutting 28% from Walker’s inflated budget that was never going to come to fruition is pretty funny. We live in such a fake world these days. Take the University budget- Compare the fake cut to what the University got in State funding in 2017 ($317 million). We are being scammed by this new administration which is pro-big government.

  • It’s good to know there is finally an adult in Juneau. We have an extremely bloated government that needs to be reduced. Hopefully the children in the legislature can have an actual discussion about how much money is wasted and where they want the money they want to waste to come from.

    The Inter Island Authority is not state run and offers ferry service in SE, it has limited service but it used to offer more. I suspect if it weren’t in direct competition with the government backed AMHS it would be able to expand its service area.

  • My cousin would like to start up a semiconductor factory in Northway that will take advantage of the gas line and the low average ambient temperature for cooling.

    I told him it’s true that he can expect to pay no taxes and that his workers (approximately 2500) can expect to have services provided to them including education while being paid to live in Alaska? He’s always saying that there isn’t any such thing as a free lunch and I just told him”Welcome to Alaska buddy!”

    I can’t wait to see what the new school will look like.

  • As far as AMHS goes it is not the routes or the crews that are the problem it is the fact that the state has not invested in the fleet and also the shore side management is out of Proportion to the vessel crews cut the shore side and lower the cost to ride and the system will run just fine.
    As for the Jones act you really don’t want to do away with it we need a strong domestic fleet if any thing we should be forcing the cruise ships to be Jones act compliant.

    • Spoken like a member of the vessel crew. The people who have to pay for you don’t see it that way.

      • Your 100% correct Art !

    • Mike, Karl Marx would be so proud.

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