With Dunleavy budget, Alaskans are talking about priorities - Must Read Alaska
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With Dunleavy budget, Alaskans are talking about priorities

By WIN GRUENING
SENIOR CONTRIBUTOR

As Alaskans take various and mostly predictable positions on Gov. Michael Dunleavy’s proposed budget reductions, a theme seems to be emerging in the Legislature.  Legislators are far from reaching any kind of consensus, yet it’s possible to discern some common elements that presage a possible outcome down the road.

In the face of Alaska’s projected $1.6 billion deficit, to no one’s surprise, some voices demand passage of new revenue measures – a statewide income tax or a sales tax. Others argue steep budget cuts are necessary even while Permanent Fund dividends be enshrined in Alaska’s Constitution and are essentially untouchable.

Win Gruening

Given the current makeup of the Legislature, it’s not likely any of these scenarios will come to pass this year.

The governor’s proposals, while balancing the budget, depend on an array of debatable statutory and policy changes. These are far-reaching and, in some cases, invite lawsuits and leave to the imagination potential consequences down the road.

Nevertheless, Gov. Dunleavy deserves credit for finally forcing Alaskans to discuss the fiscal reality confronting us.

In the Legislature, even conservative voices supporting budget reductions are distancing themselves from the level of cuts being contemplated by the administration.

No doubt they are being influenced by the municipalities they represent.

Many proposed cuts would effectively shift much of the reductions to municipalities across the state. This puts questions of “needs vs wants” squarely in the laps of local taxing authorities where, some would argue, they belong.

But, the wheels of bureaucracy move slowly, and to assume local governments could possibly react in time to absorb these reductions by either raising taxes or canceling projects and services overnight is not reasonable.

Furthermore, proposed cuts to the ferry system, healthcare, and education, for example, require time to analyze for reductions to make sense.

Regardless of one’s feelings about proposed reduction levels, it seems many Alaskans prefer a more realistic approach that phases reductions in over time.

The House Majority is signaling a tax is off the table this year, and to expect budget cuts. “The sheer complexity of taking on the proposed change to the budget itself will consume most our time going forward,” House Speaker Bryce Edgmon, said recently. Edgmon said he’s asked caucus members to “help share the pain.”

Senate Finance Committee Co-Chair Natasha von Imhof explained it this way, “I keep hearing the administration referring to this ‘fiscal crisis.’ We don’t have a fiscal crisis. We have a priority crisis.  We have enough money to pay for a certain level of government services, and a certain level for a dividend. We just don’t have enough money to pay for both at the highest level desired.”

Given the House and Senate public positions, what outcome is possible and reasonable in the session time remaining?

The final date to approve a budget – June 30 – is fast approaching.  With much of the session taken up with organizational changes, legislation supporting the Governor’s budget proposal has yet to be reviewed.

It isn’t hard to see where we are headed and to do the math.

$1.6 billion in suggested cuts cannot be absorbed in the short term and new taxes, even if proposed, would likely be vetoed.

There is only one existing revenue source available large enough to make a difference:

Alaska’s Permanent Fund.

Approved last year under Senate Bill 26, Percent-of-Market-Value (POMV) legislation allows a portion of the Permanent Fund earnings to be split between a permanent fund dividend (PFD) and paying for government services.

Maintaining PFD’s near last year’s level would make available enough funding to shrink the deficit to a manageable level – in the $350 million range.  A deficit of this size could be handled with targeted expenditure reductions and a minimal draw from the Constitutional Budget Reserve.

When warranted, Gov. Dunleavy would have the option of restoring PFD’s to a higher level in the future, thereby keeping his campaign promise, but it would allow time for any further cuts to be absorbed and Alaska’s economy to continue its recovery.

Equally as important, maintaining curtailment of the PFD during this crisis means every Alaskan would share the pain.

Win Gruening retired as the senior vice president in charge of business banking for Key Bank in 2012. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is active in community affairs as a 30-plus year member of Juneau Downtown Rotary Club and has been involved in various local and statewide organizations.

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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

  • “No doubt they are being influenced by the municipalities they represent.”
    .
    One has only to look at the Alaska Municpal League’s membership list and the Alaska Public Office Commission’s 2019 Lobbyist Directory to understand the “influence”.
    .
    The Lobbyist Directory shows buyers invest nearly $19.2M annually to buy legislative “influence”.
    .
    The Alaska Municipal League, a statewide organization of over 160 cities, boroughs, and unified municipalities, representing over 98 percent of Alaska’s municipalities, has over $601M ratholed away out of taxpayers’ reach but wants taxes forced on productive Alaskans.
    .
    So, expect PFD’s to be curtailed and new taxes to be forced on what’s left of productive Alaskans after the Exodus in order to give lobbyists what they want and support our Alaska Municipal League in the style to which its members have become entitled.
    .
    With luck (what we’ll use instead of audits) our government will grow way too big for remaining, productive Alaskans to support, they simply can’t be taxed enough to feed the thing.
    .
    By a predictable miracle the thing will collapse on itself, and require rebuilding, but damn sure not by those who brought about the crash.
    .
    And, happily, life will go on.

  • Good article. You nailed it: needs v. wants.

  • As I read the news and public commentary regarding Alaska’s budget debate, many seem to have an attitude that can best described as outrage, saying thing like: “How dare our Governor propose taking so much from us?!!

    While I understand people often react to loss with emotion, I don’t think the outrage I’ve detected is focused on the right thing. I believe the question people should ask, with strong emotion, is: “How have current and previous legislators allow our state to continue to have such an oversized budget year after year?”

    Today’s budget debate is dramatic because the needed cuts we’re not made gradually over the past decade … when they were first needed. It is not because one man bravely proposed a budget that fits within the state’s means, while leaving the PFD intact for the people.

    Governor Dunleavy’s proposal was an admirable and brave step that should cause outrage over what’s been going on for more than a decade, not over his proposal.

    My family manages our budget and we spend less than we earn. We save for rainy days. We save for our futures. It’s easy to accomplish these things. Anyone can do it. It only takes discipline and an ongoing choice to sacrifice some of what we’d like. We don’t buy new cars. We don’t carry credit card balances. The state needs to live within it’s means too. We all do.

    It might be painful to do so. Especially at first. But, I know from personal experience, the long term reward is more than worth the short term pain.

    Tighten your belts people!!

  • Excellent assessment in my opinion. I think the administration has a lot of hard work in front of it and hope they take the task seriously.

  • Alaska has morphed into another mishandled, misguided, over budgeted, soon to be less populated state. The liberals have seen to that. It is unreal how the “newcomers” to the state have systematically tried to destroy it. They brought their “gimme'” with them when they came. Now, they’re still trying to ruin what is left over. There are fewer people in Alaska than one mid sized town outside. There is simply not enough tax base to give the public employees/teachers what they want. If they (dims) try to force it, the state will shrink to, probably, a small fraction of the current residents. I know many who are already talking of selling and leaving. The state is already expensive, lacking residents to tax, and now, losing the PFD that so many count on to survive. It won’t be long and the poor teachers and public union employees won’t have the resources to steal from Alaskans. There won’t be enough Alaskans.

  • Our city manager just got a 25k raise to 220k. Life goes on.

  • The analogy that a government budget should be run like a household budget is just false. I can decide not to buy a truck if I don’t have the cash but the state can’t shut down a ferry because they don’t feel like funding it. Many, many people rely on it, some for life and death issues, others, the difference between making a decent living or moving out of state. And sometimes debt is good. It can often be more beneficial to take on debt than to ignore maintenance issues like infrastructure. And sometimes you need to spend a few bucks to make money, like the research programs that our universities provide. I run a tight household, carry very little debt, drive old vehicles and catch my own fish but I can’t provide my own fire department, police protection, road upkeep, library, and airport. I respect you frugality but it simply is not a model for government budgets.

    • With respect, the analogy is practical; one doubts buyers outside your home invest $19.2M annually in lobbyists to tell you how to run your home and launder your money.
      .
      Your household operations aren’t strangled by public-employee unions.
      .
      Illiteracy and ignorance are probably not acceptable in your household, neither is overpriced, third-rate day care in lieu of classical education..
      .
      Your property is probably not deliberately neglected to the point that minor preventive maintenance becomes major repair so your contractor buddies get more money out of the deal.
      .
      Your neighbors are probably not required to give you money or housing because you fall into any number of victim classes.
      .
      Your neighbors probably aren’t required to pay your way because you live on tribal land and are therefore exempt from everything.
      .
      You’re very accountable for income and expenses; try telling the IRS otherwise.
      .
      You don’t rathole $600M in your piggy bank like the Alaska Municipal League then demand neighbors give you money because you’re broke.
      .
      Last, but not least, it seems reasonable to believe your household policy does not require residents to pay for baby butchery in the name of Planned Parenthood.

    • DanJ,
      I disagree with you. I take it you were not in Alaska before the oil boom and the PFD was established. Then, a modest income tax was in place. No where near the State/Territory spending then. There were no public employee and teacher unions sucking up every dollar. The state/territory did fine. Spending was in check. Great educations. Now, we have the huge draw of 25,000 unionized state employees and teachers with their artificially inflated incomes and retirements feeding at the public trough. Educational standards are in the septic tank. That same situation has bankrupted state after state and city after city. Alaska was different then. It can be different now. Our governor Dunleavy is on the correct path to save Alaska from the fate befalling our brothers and sisters outside. He knows what must be done. CUT SPENDING and live within our means. Do not give in to the demands for MORE AND MORE. Support our governor’s budget.

  • While I respect your right to all these opinions, they seem to prove my point that as a homeowner, I do not have to deal with any of them….. but a government does … they have to recognize unions, tribal organizations, lobbyist, publicly mandated education, the health and well being of all citizens, including the illiterate and ignorant , transportation infrastructure including the AK marine highway, deferred maintenance of facilities like harbors and airports and while my household decisions only affect my family, the Governor’s budget affects us all rich, poor, educated and ignorant. Sad times that we are so judgmental against each other, emotions inflamed by leaders who seek to divide instead of unite.

  • Scale is different, but the principle’s the same…
    .
    Mismanage, corrupt your household like government does to the state, you’ll not likely to have a house or a family for long because, unlike government officials, you’ll be held accountable.
    .
    Robust debate, not sad times. The Left wants to take your stuff and redistribute it among their friends, while isolating you and accusing you of incivility if you oppose them, a tactic straight from Alinsky’s “Rules for Radicals”.
    .
    More than a few Americans are not about to let that happen.

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