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Saturday, February 16, 2019
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Honest budget: Sustainable, predictable, affordable

By MICHAEL J. DUNLEAVY
GOVERNOR OF ALASKA

One promise I made to Alaskans was to present you with a permanent fiscal plan, one where we tackle our economic challenges and start bringing fiscal responsibility to Juneau. Combined with a series of legislative proposals and constitutional amendments, a major element of that commitment is addressing the State’s out-of-control spending.

This year we’re presenting the Legislature with an annual budget that takes an open and straightforward approach. Rather than starting with the bloated budgets of the past and asking ourselves “where do we cut,” we did exactly what Alaskan families and small businesses are forced to do when faced with financial hardship. We started from the ground floor and built an annual budget where the amount we spend aligns with the amount we bring in; an approach that built a budget up, rather than reducing a budget down.

As we’ve all seen, for too long politicians haven’t been honest when it comes to the numbers and the seriousness of our fiscal woes. We’ve seen misleading figures, confusing budget tactics; we’ve relied on massive amounts of savings and Alaskan’s PFD’s to grow the size and reach of government – all while never seriously tackling the issue of spending. Today I’m here to say: those days are over. We can no longer spend what we don’t have and we can’t pretend otherwise.

The economic outlook Alaska faces today is dire. After burning through nearly every dollar in the State’s savings account – over $14 billion over the last four years – we are faced with another billion and a half dollar deficit, and less than a year in reserves. The gradual glide path approach, which lawmakers called for repeatedly since the rapid decline in oil prices, never came to fruition. Oversized budgets and outmatched spending continued with little recourse.

In building this budget, my team and I worked across government to identify efficiencies, duplications, and cost savings to restore the core principles of government responsibility. We built a balanced budget where expenditures do not exceed revenues; a budget that shows Alaskans the realities of where we are and the tough choices that have to be made. We looked for logical constraints on government and built a budget based on these core tenets:

  • Expenditures cannot exceed existing revenue;
  • The Budget is built on core functions that impact a majority of Alaskans;
  • Maintaining and protecting our reserves;
  • The Budget does not take additional funds from Alaskans through taxes or the PFD;
  • Sustainable, Predictable, and Affordable.

The foundation to my budget is based on the principle that expenditures cannot exceed revenues. For the first time in decades, our budget will match the money we spend as a state with the revenues we bring in as a state. This year, based on the revenues we have identified and the dollars made available through previously enacted law, we built a budget based on $4.6 billion in revenues. The differences in funding, the consolidation of core services, and the changes to programs take a serious approach to our financial situation, while reflecting a sincere commitment to put the full amount of the Permanent Fund Dividend back into the hands of Alaskans.

 Our focus also prioritized the core functions of government, functions that impact a majority of Alaskans.  This truth-in-budgeting-approach examined required state obligations, the size and scope of government, services and needs, and resulted in a budget that for the first time gets our fiscal house in order. It includes a number of government-wide initiatives to improve effectiveness and refocus spending, including constraints on government travel, limits on top-tiered government wages, reforms to government procurement, and reorganization of staff and departments. While some will describe these and other reforms as drastic, I say to them: show me a proposal that stops our unsustainable spending trajectory and accounts for our current financial dilemma.

In order to protect what little savings remain, we have prioritized maintaining and protecting what little we have left in reserves. The days of spending everything we have and avoiding the tough decisions for our future must end. If this spend-at-all-cost mentality is allowed to persist, Alaska’s economic outlook will only grow darker and the future of the Permanent Fund Dividend will diminish by the day.

Based on the will of the people, and a sincere belief that we can’t tax our way out of these fiscal challenges, my budget proposes no new revenues from Alaskans. While some wish to ignore Alaskans and propose billion dollar taxes and PFD grabs to close our financial gap, I’ve made clear that this is out of line with the core beliefs of most Alaskans and the promises I made on the campaign trail.

And finally, our budget takes a sustainable, predictable and affordable approach.We must reset the spending clock and realign expenditures with the realities we face today. We must transform government at its core, right size spending, eliminate duplication and prioritize programs to match our reality. Though we’ve been blessed financially in the past, we must establish a government that can weather the storm of low oil prices and save for the next generation of Alaskans.

As your governor, I will always be honest with you. I will treat the people’s money with the care and respect it deserves. As the details of my budget proposal are unveiled over the coming days, I ask all Alaskans to consider the alternative. Continuing down the path of oversized budgets, outsized spending, and out-of-line priorities will only jeopardize the future of our state.

For those demanding more spending, including those in the Legislature, we must respectfully insist: Where will the money come from?  We must be honest with ourselves and align our spending with our revenues in order to bring about a brighter future for the Alaskan people.

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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

  • Thank you Governor! Finally someone who is talking some fiscal sense. Every Alaskan should contact their elected representatives and insist that they back this plan or cut the spending even further to protect our savings and our future. A bloated and inefficient state bureaucracy is not productive and will not contribute in any way to that future.

    For a reality check you should consider other similar states and what they spend to govern. Utah and Idaho, for example, are very similar to Alaska. They are big Western resource states with about half their population located in close proximity to their urban areas. Utah’s total state budget is $4492 per capita and Idaho’s budget is $4720 per capita. Alaska’s total budget is $14,290. That’s about 3X what these other states spend on pretty much the same services!

    They will try to trick you by doing a shell game with federal funded portions of the budget and portions funded by fees. Well – that is a sham. Drilling a little deeper we see that the Federally funded portion of those other states’ budgets is about the same as Alaska’s. Using state funds, Alaska spends $9,839 per capita, while Utah and Idaho spend about $3000 per capita. Still a 3X multiplier! Despite spending 3 times per capita on state government, Alaska ranks #28 in healthcare and #40 of all the states in Education. Utah is #3 in Education and #10 in Healthcare.

    Now . . . we know that some of the funds Alaska spends are restricted or funded by user fees, and others have matching funds, so the real discretionary spending is the unrestricted general fund budget (UGF). That is the portion of the budget that needs to be addressed most urgently. Last year’s UGF is $4.3 Billion, about $5800 per capita. If Alaska just brought our UGF spending down to $3000 per capita we’d still be spending far more per person than these other states. Alaskans should insist on this at the very least. That $4.3 Billion should go down to $2.2 Billion before we start talking about increasing the revenues. Hopefully Governor Dunleavy will stop this shell game and establish a proposed budget of $3.3 Billion (UGF), then a plan to cut that budget down to $2.2 Billion within 4 years. After that we can talk about an income tax if we’re still draining the savings. If we really make these cuts we’ll have money to reinvest and stimulate growth.

    Learn more here:
    https://ballotpedia.org/Total_state_government_expenditures
    (note, link has comparisons of 2016 numbers, but 2017 links are provided by each state)

    https://www.usnews.com/news/best-states/rankings

    https://www.usgovernmentspending.com/spending_chart_1997_2017AKb_13s1li111mcn_F0t

    • That’s all good, but Alaska is a lot more spread out and does have unique transportation costs/issues to deal with making our cost of living a little higher than those states you mentioned.

      A leaner budget is still doable, but not to the extent as what we see with continental US states.

    • In-state tuition for the University of Utah is $8,197 USD. It’s $7000 at the University of Idaho. In-state tuition at UAF is currently 5,674 and 5,545 at UAA. We’ll have to dramatically increase tuition and maybe close a university campus or two. Students and their families will bear the burden. Similar things will happen in other sectors. Anchorage doesn’t have a sales tax. I’d expect to see that change. And those outlying areas that can’t find an alternative source of revenue to pay for needed services like education, etc. Well, too bad for them I guess.

  • Thank you Governor!

    It can’t be easy, but I don’t want to see Alaska bankrupt.

  • One of my favorite stories from the pipeline “Hey days” was about a rig management determined had too many people working on it.
    They sent a management team north to see who wasn’t needed on the rig . . . and found everyone busy. They couldn’t wee anyone obviously loafing or unoccupied.
    Sctaching their heads, knowing the rig just wasn’t supposed to operate with that many workers, management decided to lay-off half the rig workers. They could always hire some back.
    So they laid of 60, leaving 60 on the rig. Once they had 60, they could see they really only needed 40. So they laid off another 20.
    The lesson: all the added positions kept each other busy, but it wasn’t necessary to the proper functioning of the rig.
    State of Alaska has about 23,000 employees. . . .

  • Godspeed, Governor.

  • I have told people for years, if I operated my checkbook the way the government did I would be in jail.
    We can’t spend more than we taken in without endangering our children’s futures.
    Thank you Governor for the right approach.

    • I don’t know about you but I’d have to get another job (i.e., source of revenue) if I had a budget shortfall of this magnitude.

  • Yes! Finally someone with common sense. Budget cutting is going to hurt but it must be done.

  • Thank you Governor Dunleavy. I am so glad you were elected. Please build constitutiona protection for the Permenant Fund.

  • Alaska has its first rock star governor. Walk tall and carry a big stick. All that the Libs and Dems have to fight you with are their angry words and hatred. Make them shiver in their boots, Big Mike.

    • Angry words, hatred, and KNOPP. All of this Knopp crap is directed at our governor, so that he doesn’t have both legislative bodies to push the governor’s agenda. The devil’s workshop is in the Democratic Party. Knopp sold his soul cheap.

  • Weed out the unnecessary state employees and weaken the govt. unions that drive up the cost of govt!!!

  • Great job – what we asked for and recommended. Truly, if you can’t afford to live in our frozen wastelands of the Arctic and sub-Arctic, please move. For well over one hundred years, people for come to Alaska and then decided to move back to the L-48. Maybe now is a good time for the thousands of people on our welfare.

  • Three cheers for Gov. Mike Dunleavy. First governor in Alaska who took the state’s credit cards and cut them up.
    ps. send the pieces to Bill Walker and tell him to enjoy his fat state pension on his next trip to Hawaii.

  • We are truly BLESSED to have a person with wisdom, courage, honesty and love for Alaska and Alaskans to lead. Gary this is what leadership is!

    Thank you Governor . I respect you more today than even when I cast my vote for you!

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