By BRUCE TANGEMAN
I know this message may be getting old for some, but many Alaskans have lost perspective on the positive position we find ourselves in. Yes, we’ve suffered through some serious “political paralysis” over the past year, but the message is worth repeating.
Alaska truly is blessed with amazing resources and a healthy balance sheet. Our permanent fund is approaching $70 billion and spins off annual revenue supporting 50% of government spending as well as a cash dividend to every Alaskan who qualifies.
We are expecting final investment decisions in the near future on two projects that will add 250,000 to 300,000 barrels per day to the pipeline. We are the envy of most states and many small countries for that matter. The frantic, sometimes unhinged debate that has taken place over the past year would lead outsiders to think our economy is on par with many of the bankrupt states in the Lower 48. Nothing could be further from the truth.
While painful, this healthy debate over the past year is necessary and was a long time coming. Like it or not, Governor Dunleavy did exactly what he campaigned on: reduce the massive size of government, fight for a full PFD, and not take hard-earned cash from your pocket through new tax schemes. Governor Dunleavy still believes in these principles. Over the past several decades we have been blessed with the ability — and cash — to be all things to all people.
Many have come to realize that we had one helluva run, but things must change. Many others think this gravy train can just keep on chugging. However, Alaska can no longer afford the budgets that were constructed and funded through one revenue stream over the past 30-plus years.
The discussion is turning more and more toward taxes. I’ll admit that I’m on the record stating that someday Alaska will have a broad-based tax. However, I always followed up that opinion by stating this decision should be years if not decades down the road, well past my tenure as commissioner of revenue.
Step one must continue to be fiscal discipline in order to get our spending habits adjusted. That must be accomplished well before we implement any sort of tax. My concern is that once a tax is on the books, the budget in place at that time will be the new base going forward. Cutting below that will be nearly impossible and the budget will only go up from there.
I believe our population and workforce is far too small to provide the level of revenue we would need to extract from working Alaskans in order to continue a “business as usual” approach to budgeting that includes the PFD. We’ve all heard the many angles and perspectives on the PFD: It’s a God-given right; it’s a welfare check; it’s free money; reducing it is a “tax”; it’s our birthright.
Regardless of where you stand on the PFD issue or government spending in general, it all comes down to math. The math is simple but unfortunately does not balance despite the governor’s best efforts: Government spending and services + PFD does not equal currently available revenue. I give Governor Dunleavy tremendous kudos for tackling the government spending issue and trust he will keep up the battle he has undertaken.
As the commissioner of revenue, I look at any potential tax implementation and its interaction with the current revenue streams and budget expenditures as a fairly simple exercise. The politics and policy are extremely difficult but the math is simple: A new tax means the department I’m responsible for will have to stand up a bureaucracy in order to extract revenue from the private sector. Or in the case of an oil tax change, take more money from the companies that are willing to invest the billions we as a state do not have yet is required to monetize our resources. Any new tax will be used to sustain this unsustainable budget, as well as provide the revenue to distribute PFD checks every October as the Department of Revenue has done for 38 years.
When I accepted the job of revenue commissioner I did so based on a path forward in which the math equation allowed for the available revenues to be split between a healthy but reduced government and provide net-positive revenue to Alaskans through the PFD. It is apparent that many have not accepted the realization that our three decades of spending patterns cannot continue.
I have loved serving the state of Alaska and Governor Dunleavy as commissioner of revenue. I’ll never forget the very sage advice Governor Dunleavy gave to his commissioners at one of our first Cabinet meetings. To paraphrase, he said, just run our departments. Don’t let the policy/politics swirling around get in the way of us doing our most important job… serving Alaskans.
I have been blessed with the best department in the entire state and really wish it was that simple. But my department will be at the heart of all discussions this session as it usually is, and I want the governor to have someone who is 100% aligned with his vision. I have therefore notified the governor that I will be resigning from his Cabinet.
I will continue in my position for as long as he needs so a smooth transition can take place. I will remain optimistic about Alaska’s future but we must agree to start walking down this path together not for our own perceived immediate needs but for the tremendous future that I believe Alaska will continue to have.
Bruce Tangeman was appointed commissioner of the Department of Revenue in late November 2018. He previously served as policy director for the Alaska Senate majority, vice president and chief financial officer of the Alaska Gasline Development Corp., and deputy commissioner in the Department of Revenue during the administration of Gov. Sean Parnell.
I nominate Rick Rydell for this job!
If he can’t make the cuts needed to balance the budget no one can! ?
He can’t.
Keep feeding the monster and see what happens.
The bit about 100% alignment being necessary suggests possible misaligned position between this commissioner and the Governor.
A guess here is Governor Dunleavy is backing away from further cuts and possibly considering increased taxes.
Oddly, no mention was made by the Commissioner of gigantic PERS/TERS pension obligations, a matter of constitutional import and one that requires attention.
I’ve gained so much from listening to Commissioner Tangeman, he will be sorely missed.
I sincerely agree with the general theme of Tangeman’s letter. Therein he wrote, “….I want the governor to have someone who is 100% aligned with his vision. I have therefore notified the governor that I will be resigning from his Cabinet.” However, the reader is left wondering how Tangeman is not “100% aligned with Dunleavy’s vision.” The letter gives no explanation whatsoever; its as if Tangeman assumes everyone is plugged into the political intrigue occurring at the capitol.
Wayno: what do you think is happening?
As to income taxes…. I heard thousands citizens of lower-48 states work as non-resident employees in Alaska. Think construction, mining, oil, fisheries, tourism, etc, etc. The lower-48 states take hundreds of millions of revenue from Alaska by taxing the income of their residents working here. This loss of income tax revenue to other states is. by far, the stupidest feature of Alaska’s tax policy. We must have lost hundreds of millions, if not billions over the decades.
Great letter Bruce, but I respectfully disagree with your budget analysis. Successive legislatures and Governors Parnell and Walker drove State spending in Alaska up to this unsustainable and unnecessary level. By comparing our spending to the exact same functions in other states you will find we spend three times (3X) more than some states, and double (2X) what most states spend on government services (reference link below). The argument that Alaska is “different” because of size and cold and geography is just not applicable to most government services. We have far too many state workers (double what we need).
This is because Alaska has chosen the most expensive and wasteful methods in the United States to provide most governmental Regulatory services, Criminal Justice services, Health Care services, Special Education services, and Administrative services. Each of these programs need to be examined, comparisons to programs in other states should be considered, and a well thought out plan needs to be developed for each agency. By tackling those five programs specifically we can reduce the state workforce by over 7,000 positions, and even then we will still have the highest number of state employees per capita in the USA!
You and your fellow commissioners failed to provide your boss with that overall plan. Instead you proposed sweeping cuts to certain programs that were politically unpopular, resulting in this shameful recall effort. You did not do the hard work of re-imagining your own departments and programs as smaller, leaner, and better. I know from personal experience that reducing and reorganizing is very hard to do as a government manager, but I also know from my businesses that lean practices result in more profitable and better companies.
Thank you for recognizing you’re the wrong guy to lean up this government. Alaska needs to make a plan, and that plan needs to reduce our government programs so they are comparable in size to other state programs doing that same work. It’s not too much to ask that all of the Governor’s managers get on board with that program.
Source of Numbers: https://ballotpedia.org/Total_state_government_expenditures
Almost all the managers, commissioners and administrators tasked with comparing and evaluating cuts and consolidations With available revenue are now pretty much free to ignore reductions now that Arduin and Tangeman are gone.
There are few genuine fiscal constraints advocates in the current administration and many of the commissioners are eager to increase their budgets.
The will likely be talk of tax increases from some within this administration.
Genuine skills to consolidate and make meaningful cuts are in very short supply in this administration. It’s a skill and will problem and the tough choices and rugged decisions on reducing spending seem to have slipped away from this administration.
Oh well ……….
Yours is a very astute observation Joe. Please don’t forget that income tax, as reprehensible as it may be, is probably the best way to get voter’s skin in the game–without which we will never get control of any budget. Oil royalty and tax revenue should be utilized for infrastructure expansion to unbridle our economy. Taxes should be used for operations.
Why do we refer to the other states as the lower 48 when in fact there are 49 states south of us?
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