By MICHAEL TAVOLIERO
For several decades, Alaskans have been told that the state faces a fiscal crisis requiring a long-term solution. Time and again, we hear claims that Alaska has “kicked the can down the road” to a dead end, and that action is urgently needed. Despite this recurring narrative, voters continue to elect representatives who neither demonstrate an understanding of sound fiscal policy nor practice fiscal discipline.
It is time for an Alaskan Department of Governmental Efficiency (ADOGE)!
Since the oil boom—a blessing and a curse—we have seen countless examples of poor decisions in capital projects, many of which have resulted in billions of dollars in losses. Meanwhile, Alaska has witnessed one of the largest expansions of bureaucracy since the era of FDR, unsurprising given that majority members of our constitutional convention were FDR Democrats.
Alaskans have been inundated with warnings about collapsing oil revenues, budget cuts, and deficits. Yet, when state government crafts an action plan, the solution invariably involves expanding government’s role, perpetuating the notion that “bigger government” is the answer to every problem. Politicians insist that addressing Alaska’s fiscal challenges will require painful measures—but the “painful solutions” often translate to increasing revenues through new taxes, the easiest option available to government and not the even simpler action of cutting costs.
Consider Alaska’s history: In 1986, with oil priced under $10 per barrel, state government employed almost 19,900 people to serve a population of under 550,000, with an operating budget of $2.7 billion.
Fast forward to 2024, with oil priced at over $60 per barrel, state employment has risen to 23,800, the population exceeds 730,000, and the operating budget has ballooned to $12.2 billion. While the population grew by 33%, state employment increased by nearly 20% fueled by a 350% surge in operating budget.
Sixty-one politicians — a governor and 60 members of our state Legislature — are responsible for driving Alaska’s costs to this level. Their decisions, guided increasingly by progressive fiscal policies and special interests, will soon push the state’s financial burdens even higher. Proposed solutions aligned with a progressive playbook: higher taxes, expanded government spending, and never kept promises of fiscal reform. These plans include spending the Permanent Fund, reducing dividends, increasing oil taxes, introducing a broad-based income and/or sales tax, and ironically imposing budget discipline, yet Alaska’s government continues to grow.
The question Alaskans must ask is whether the state will follow the new federal path of deregulation and cost-cutting, as the Trump administration returns in 2025. This is a crucial issue for the future of Alaska, a state with the greatest untapped natural resources in the nation. (As a side note, Alaska has an abundance of rare earth elements which will be desperately needed by our nation very soon, yet no plans for processing or refining these resources.)
Unfortunately, the current political landscape suggests that Alaska’s fiscal challenges will persist. Republican lawmakers such as Reps. Chuck Kopp, Louise Stutes, and Sens. Kelly Merrick, Gary Stevens, Bert Stedman, and Jesse Bjorkman are aligned with Democrats. What will this cost the state and the voters who elected them?
Their continued support for Democratic priorities may perpetuate the cycle of higher taxes, greater spending, and diminished opportunities for Alaska’s private sector.
Alaskans must demand real answers and leadership to break free from this dead end of fiscal irresponsibility and chart the right path forward.
When fiscal policy prioritizes government spending over the private sector, this shift leads to a troubling scenario. If government spending is not restrained, it crowds out private sector activity. This creates the worst possible outcome, particularly for Alaska, where the development of underutilized natural resources is stifled by the illusion of prosperity driven by unchecked government growth.
The United States stands on the brink of a transformative era of prosperity and functionality, driven by unprecedented innovation. Five emerging technological platforms—robotics, energy storage, artificial intelligence, blockchain technology, and multi-omic sequencing—are advancing from early adoption to mainstream application. As these platforms mature and converge, they will unlock opportunities that today are unimaginable, consistently driving productivity growth into the 4% to 5% range.
Why should Alaskans—and our progressive state legislature—pay attention? The answer is straightforward: these innovations will fuel nationwide economic growth, creating a rising tide that could benefit all Americans, including Alaskans. However, there is a critical caveat tied to Alaska’s dependence on oil revenues.
Under President Trump’s first term, U.S. crude oil production surged from 8.5 million barrels per day to 13 million barrels per day, driving energy prices down and spurring deflationary economic growth. If this trend resumes and accelerates, production could reach 16 million barrels per day by 2028.
While this will lower energy costs and enhance U.S. competitiveness globally, it also spells challenges for Alaska. Oil prices, adjusted for inflation, could plummet to $30 per barrel—posing a significant fiscal risk for a state heavily reliant on oil revenue.
Meanwhile, global economic dynamics suggest further challenges for Europe and China, which are likely to face prolonged recessionary pressures. This imbalance could lead to increased capital investment in the United States, amplifying deflationary forces domestically through cheaper energy and technological advancements. For Alaska, these deflationary trends will compound the economic impact of falling oil prices yet offer the potential of tremendous natural resource development and support to the lower 48.
Alaska’s policymakers must recognize that a new era of economic transformation is unfolding. While the nation will benefit from reduced energy costs and technological breakthroughs, Alaska faces a unique challenge: adapting to a world where oil revenue is no longer a reliable pillar of the state’s economy.
Can Alaska seek to diversify its economy?
Alaska must recognize the regulatory and investment needs in industries tied to emerging technologies, including technology convergence, digital infrastructure, and precision medicine. The state should work proactively with the Trump Administration to leverage its natural resources effectively, prioritizing the development of untapped resources in ways that align with global market trends and technological advancements.
Fiscal reform is also essential. If the federal government, through initiatives like the Department of Governmental Efficiency, can justify trimming $2 to $3 trillion from the federal budget to bolster the national economy and our future, Alaska—where 56% of the operating budget comes from federal funds—should similarly address its own bureaucratic inefficiencies and shortcomings.
Reducing dependence on oil revenues requires fostering private sector growth and implementing reasoned budgetary practices. By embracing these changes and aligning with national and global innovation trends, Alaska can position itself for long-term prosperity, even amidst economic and technological shifts.
Michael Tavoliero is a senior contibutor at Must Read Alaska
