By TERRENCE SHANIGAN
This article is the first installment of a two-part series.
Picture this: Alaska’s state budget is a moose-sized piñata, stuffed to the antlers with $12.2 billion in 2025, up from a leaner $6.3 billion back in 2005, a 93 percent leap that makes inflation look like it’s trudging through knee-deep snow. Yet, here come the politicians, puffing out their chests like sled dogs at the Iditarod, insisting the only way to keep this party going is to slap you with taxes or swipe a chunk of your Permanent Fund Dividend (PFD).
Spoiler alert: that’s a snow job bigger than a Fairbanks blizzard. The real scoop? Alaska’s budget is a circus of supersized spending that is plump with some waste, duplication, and a lot of inefficiencies. Trim that fat, and we could fund your PFD and throw in a complimentary moose nugget souvenir.
The Budget Boom: A Comedy of Errors, Minus the Punchline
Let’s start with the numbers because nothing says “fun” like a deep dive into fiscal quicksand.
In 2005, Alaska had a workforce of approximately 16,740 people. Fast forward to 2025, the workforce has shrunk 13 percent to 14,564, per the Office of Management and Budget, yet total spending has nearly doubled. Inflation clocked in at a measly 63 percent in comparison, according to the Bureau of Labor Statistics. So, what’s driving this runaway dogsled? It’s not population (still hovering around 730,000) or economic boom times.
The answer is that we are not swimming in gold. It’s spending gone wilder than a bear in a berry patch.
Take the approximate cost per state employee (pay, retirement, and benefits combined): estimated at $62,700 in 2005, now a 78 percent spike to an estimated $111,600 in 2025, according to OpenTheBooks and the Alaska Department of Administration workforce profile. That’s like trading your snowmachine for a private jet and still complaining about the gas bill.
Why the hike? Health insurance costs are up, but so are salaries and pensions, even as productivity lags. Administrative overhead eats up 15 percent or more of budgets across agencies. Think of it as paying for a deluxe igloo when a tent would do.
A huge budget cost-driver is excessive vacant employee positions across state government to the tune of 17 percent, which has gone on for over 20 years. Private sector vacancy rates range between 3 percent and 10 percent, depending on the industry. Below 5 percent suggests full staffing and is an ideal vacancy rate. Above 10 percent could signal an unhealthy system or workplace. The vacancy factor is a good read on an organization’s overall health and can be essential to long-range planning accounting for attrition and growth. At an approximate average of 17 percent for state agencies, it makes one wonder what the issue is. Some explain that such a high vacancy rate is due to low wages and poor benefits and the government jobs just are not attractive enough.
House Bill 180 was supposed to be a watchdog for stale, vacant positions, filed during the Alaska Legislature in 2021-2022 by former Rep. Ben Carpenter. The bill aimed at amending Alaska Statute Sec. 39.25.156 and suggested a process to eliminate vacant positions. HB 180 proposed that on “June 30 of each year, the Director of Personnel would eliminate a vacant position in the classified or partially exempt service that had been unfilled for the immediately preceding 364-day period.”
Here is the fine print: HB 180 would have ensured that only unused positions were targeted, protecting those in active recruitment less than 364 days old. Like many good ideas in the Juneau, once it is put into the meat grinder of committee hearings, it failed to pass. Since then, the vacancy factor has remained sky-high, and there is no statutory accountability mechanism directing departments to return those unfilled positions. Do they now get a pass on their excessive vacant positions if they are advertised? What about if they are temporarily occupied for even one day? Is this done to keep the money in their budgets to be applied elsewhere?
Alaska needs a statute that explicitly details what to do if money is approved for a vacant position that is not filled in a certain amount of time. The funds should have limited flexibility to be used by a department to pay overtime and should be returned to the general fund after 364 days to be reappropriated only by the legislature, as Carpenter proposed. I am not suggesting that departments present inaccurate or deceptive budgets, but a more efficient way to ensure accountability for every public dollar spent would be to restrict the executive branch from discretionary funding flexibility with mechanisms like this. When there is a cost overrun due to an unforeseen situation, department managers can use the established supplementary budget process, return to the legislature, request from the appropriating body, and ask for more funds. We shouldn’t be able to do both because it drives this insatiable appetite for more money and renews the calls for needing more of your PFD or proposed taxes.
Education: Funded like Oil Barrons, Results Resemble Moose Droppings
Then there’s education, where spending crept from $12,926 per pupil in 2005 to an estimated $21,676 in 2024, a 67 percent jump, according to the U.S. Census Bureau’s Annual Survey of School System Finances with estimated inflationary adjustments and known BSA increases. Sounds reasonable, right? Except fourth-grade reading proficiency slid from 29 percent to 27 percent, per the National Center for Education Statistics, and public schools now burn through all this cash with no expectation of improved outcomes. Compare that to Alaska’s homeschool programs, thriving on $5,364 per kid, with parents reporting better outcomes. Many public school districts skim up to 50 percent of those homeschool funds for their “admin costs.” It’s like hiring a chef who eats half your groceries before cooking.
Why do we permit this to happen? If equal competition were allowed in our learning system, teachers could provide more personalized educational opportunities in K-12.
Imagine if that $21,676 followed a student. An elementary teacher, for example, could build a customized classroom for 18 children with a budget of $390,000. Teachers could lease space in our many vacant and under-capacity schools for a reasonable cost ($25,000), pay themselves an executive salary ($150,000), hire a well-qualified teacher’s aide ($75,000), Insurance ($50,000), and still have nearly $90,000 for supplies, field trips, extracurricular activities, et cetera. And no union dues or administrative overhead. Just academic accountability directly to parents. Perform, or they leave and find a new teacher. You don’t have to dismantle the public system to do this. That is a choice for parents to make. Parents can choose if they want their money to be used in the available public system or the higher-performing academic system of their choosing. If the public system is underperforming, the parents can leave. This is an excellent incentive to focus on results and learning outcomes, not just checking the box and arguing for weeks on end every year about adjusting one part of the student funding formula, the BSA.
What about public safety? How does this affect Medicaid? Then there’s the million-dollar question: why do lawmakers want more of your PFD?
We’ll dive into that in the next and final installment.
Terrence Shanigan is a lifelong Alaskan of Sugpiaq descent from Bristol Bay. He is also the co-founder of Mission Critical, is a combat veteran, an honored husband and a dedicated father.
I recall sitting through meetings being regaled with “but if we don’t use it up (i.e., dump our budget on travel, pricey hotels) we won’t get it next year”. Maybe the state should open a branch for the travel and hospitality industry. Just an observation made when I worked there.
I say have both houses of our legislature convene in Fairbanks or Anchorage not Juneau.
They can keep their offices down there, but they couldn’t hide out anymore.
We need to have better access to them so we can hold them accountable.
I don’t know who elects these idiots but I’ve about had enough of them
This is a good start to read and see how it’s really going. Unfortunately, the politicians in Juneau don’t care. They play games with your money and expect you to suffer for it while they get lobbyists and special interest groups paychecks. We all know what’s going on, but we have no voice while they are shacked up in the Capitol. Whatever happened to the great idea that they rotate sessions across the state so the people can get to them? If we were in their faces, then maybe we could enact change.
This is a very good analysis of topics difficult to articulate.
Exactly my recall over 25 years as a state worker. Use it or loose it,
woulda, coulda, shoulda. A lot of bleating doesn’t do much good. Although I totally agree that the government is too large and should be drastically cut, it is obvious the Legislature will never do it until the money runs out. That means the Dividend will go first before new taxes can be permitted under the State Constitution. Also the Legislature will likely end the Hilcorp S Corporation tax exemption to squeeze more money out of the oil. (Of course this will dampen somewhat the investment on the North Slope and Cook Inlet.)
I have been bleating myself for years of the need to reduce, eliminate or drastically change the structure of the Dividend program.
As for now, Capitalism is still dead and the remaining fight is between the Dividend Socialists and the Big Government Socialists. Which side are you on?
Are we sure about these figures? Our population is 730,000, and only 14,564 people are actually working?!? This means only ONE person in 50 is actually employed? This can’t be correct?
These changes would be nice, but the Marxist that run the state in Juneau will not change anything. The people keep electing them and then complain. Totally the fault of the people for sending the money grubbing people back year after year.