Gov. Mike Dunleavy introduced a budget proposal on Thursday that contains a $1.5 billion deficit with no plan to pay for it other than drawing down the state’s limited savings.
The governor offered little vision to address the state’s structural budget problems other than to gesture broadly at expected increases in the resource extraction industries under the incoming Trump administration. Instead, he insisted that legislators — who are set to be organized into two mostly Democratic bipartisan majorities — need to figure out how to balance the budget.
“That’s a discussion the legislators should have,” he said.
The budget proposed only minor tweaks to state services and envisions paying out a full Alaska Permanent Fund dividend according to state law, something that hasn’t happened in nearly a decade. At his news conference rollout on Thursday, Dunleavy met questions about the $1.5 billion deficit and multibillion-dollar deficits projected in future years by warning against efforts to balance the state’s budget with taxes or cuts to the dividend because it may cause more Alaskans to move away.
“I believe that the resource base of Alaska is the solution to the future,” the governor said when asked if he planned to suggest any solutions to the billion-dollar gap that his own budget office projects will happen in a matter of years. “I believe an income tax on the people of Alaska, a sales tax on the people of Alaska, taking what’s left of the dividend from the people of Alaska. If that’s going to happen, I would suggest that we all invest in U-haul.”
But Alaskans are already moving away. The state has experienced 11 years of net outmigration — starting with the collapse in oil prices and ensuing cuts to state services. When combined with an aging population, the state’s demographer is predicting the state’s population will stop growing altogether and will decline by nearly 2% by 2050.
Even U-Haul’s own “U-Haul Growth Index” — an annual index of how many people are moving in and out of a state with U-Haul — paints a bleak picture. In 2022, Alaska ranked 41st, with 51.4% of all customers leaving the state. In 2023, that improved to just 50.7% of customers leaving, ranking Alaska 34th.
To combat those trends, several legislators in the incoming, primarily Democratic bipartisan coalitions in the House and Senate argue that investments in child care, education, housing and workforce development are key to reversing those trends. Some have suggested increasing oil and gas taxes or implementing sales or income taxes to raise revenue. Others have pointed out that the state can avoid taxes and invest in services by reducing dividends.
Dunleavy and other Republicans have opposed pretty much any tax proposal and resisted making any changes to the PFD statute, leaving them with few serious solutions to balance the budget after they largely abandoned efforts to slash government spending. Instead, as was the case today, Dunleavy insisted that resource development can and will fill the state’s coffers now that Trump will be president.
It should be noted that Dunleavy’s administration teased a sales tax proposal in 2023 but ultimately never introduced the measure. Soon-to-be-former Nikiski Republican Rep. Ben Carpenter — a right-wing conservative — also floated a sales tax last session, but it was largely in service of paying for a cut to the state’s corporate tax rate.
At the news conference, Dunleavy defended the unbalanced plan, saying he was simply following the statutory formula for the dividend (despite the Alaska Supreme Court’s ruling that it isn’t enforceable). Neil Steininger, Dunleavy’s former budget director who now writes about politics, noted at the news conference that the governor’s budget omitted the long-term budget outlook required under state law.
It’s not the first time Dunleavy has punted on taking a lead on the state’s challenging financial situation, and legislators have come to put little stock in his budget proposals. In several years, legislators took the once-unusual route of ignoring his budget and starting with their proposal.
That will likely be the case this year, too.
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.
