This article was originally published on akmemo.com.
Gov. Mike Dunleavy released his budget proposal last week, outlining a “status quo” spending plan that reflects his status quo politics of calling for a big dividend, refusing to increase K-12 funding and providing no meaningful leadership on how to close the $1 billion deficit created by his spending decisions. The governor signaled disinterest in making the difficult, meaningful decisions — on cuts, taxes or the dividend — that most believe are needed to settle the impasse over the state’s finances.
“We’re now in an election year,” he said when asked about the deficit, the sales tax his administration teased but never introduced and the scrapped plans for the fall special session on a fiscal plan. “I don’t know how much momentum will occur this year.”
Instead, the governor regaled reporters for nearly an hour on how Alaska can and should drill, mine and log its way to fiscal stability. Even for a governor with the ignoble distinction of being one of the only elected officials to support the controversial Pebble Mine project, it was an effusive display. He even waded into the 2024 election, arguing that the outcome will determine Alaska’s future — a bustling resource-extraction state under Trump or a dark and joyless future under Biden.
“If we can’t do it, then we have to talk about reducing the size of government,” he said, which will force people to leave and the remaining Alaskans to ask questions like, “Why are we building more playgrounds? Where is the cheer and chatter and laughter of kids?”
Never mind that the government has been cut massively over the last decade, and outmigration is already eating away at Alaska’s future.
Like most of Dunleavy’s time in office, it’s an overly simplistic solution to a complex problem that will make reaching a lasting resolution to the state budget crisis that much more difficult. Even his own projections show the state will run its savings accounts dry within two years under his plan, a key point when timelines for resource projects to start pumping money into the treasury can easily top a decade.
When asked how this call for unbridled resource development comports with the complicated economics and logistics of developing resources in Alaska, the governor suggested Alaskans are simply not asking and fighting hard enough. That’s precisely why everyone, he argued, “should be saying ‘yes’ to as many projects as possible.”
But even with a project where everyone is saying “yes”—the Willow project, which legislators unanimously supported through a resolution this year and is moving ahead with the Biden administration’s approval over the protests of environmental groups—the financial picture is far from the silver bullet Dunleavy would suggest. That’s because Willow is being developed on federal land, meaning it won’t be a massive cash cow for the state and could be a drag in the early years.
It has about as much wind at its back as possible in today’s politics, and Alaska will still have drained its savings when it comes online if the governor has his way.
And by the way, even a Trump administration isn’t guaranteed to put shovels in the ground — remember when the former president recognized that Pebble is a bad idea?
The status quo
In the bigger picture, the exercise is just more out of the same playbook the governor has been using while in office: Put forward an unrealistic plan, hand it off to the Alaska Legislature to make the hard decisions and blame them for doing so.
The governor’s first-year budget is particularly illustrative of this approach. As far as I can tell, the sole parameters that budget director Donna Arduin received when crafting the proposal were “full PFD, no new taxes.” Everything else was left up to her. To make those two points work without magical thinking, Arduin put forward massive cuts to K-12 education, the University of Alaska and a scuttling of the Alaska Marine Highway System, to name a few. As odious as the budget was, it at least tried to provide an answer to the deficit — one anyone could’ve told you would be a non-starter.
The legislative resistance and subsequent recall effort cooled that kind of budgeting, but the governor hasn’t given up on his vague, wishful thinking.
Instead of showing Alaskans the reality of what a billion-dollar structural deficit means, the governor has essentially answered all questions about the massive deficits contained in his budgets with a shrug and a suggestion we pay for it with our meager savings or—in some particularly alarming moments — by overdrawing the Alaska Permanent Fund (recall also that it’s Dunleavy’s closest allies on the Board of Trustees that were pushing for the risky plan to boost the fund’s value).
To be clear, reaching a lasting fiscal plan will be no small feat. The Legislature is far from consensus on the preferred mix of cuts, revenue and dividend changes. These serious decisions require thoughtful deliberation and work, but Dunleavy has done little more than arrive in the 11th hour to blow up any progress.
Well-meaning efforts by legislators to address the fiscal plan in recent years through a reworked dividend formula or new revenues have all faltered under the Legislature’s internal divisions and the looming threat of the governor’s veto pen. At times, he’s demanded any taxes be put to a public vote, and at others, he’s first demanded constitutional amendments. Without any progress on those fronts, the Legislature has resorted to the path of least political resistance to balance the budget and preserve savings: Ignoring the formula on the PFD and cutting it via the budget.
Meanwhile, much of the rest of the state is sitting on hold.
Time after time over the last decade, legislators and the governor have nixed calls for the state to invest in itself, citing its ongoing financial woes. And, critically, it’s essential to remember that status quo funding doesn’t mean status quo delivery of services. Increasing costs and inflation eat into the funding and undermine its buying power, an experience that schools have felt throughout Alaska.
Dunleavy’s new insistence that resource development should be the solution to the state’s budget is just another excuse to hamper any efforts to address the state’s financial situation. Sure, it’s an election year where votes on taxes will become prime campaign material, but on a practical level, why even try when you have a governor who will veto any new taxes and assert we should simply be drilling more?
Stay tuned.
Matt Acuña Buxton is a long-time political reporter who has written for the Fairbanks Daily News-Miner and The Midnight Sun political blog. He also authors the daily politics newsletter, The Alaska Memo, and can frequently be found live-tweeting public meetings on Twitter.
