Dunleavy unveils no-new-taxes, no-PFD-raid Alaska budget proposal

WASILLA — On Monday, Alaska State Senator Mike Dunleavy released the details of a plan that does what some Alaskans have been clamoring for since last year’s Permanent Fund Dividend cut – achieve a sustainable budget that navigates Alaska through a period of low oil prices, without introducing new taxes or cutting the PFD.

“For those who say you cannot get out of this without taxes and reconfiguration of the Permanent Fund Dividend,” Dunleavy said in a phone interview Tuesday. “The mathematics has been checked by several people. You can get out of it — your cuts will be steeper, but you can get out of it.”

Gov. Bill Walker’s proposal relies on spending reductions, PFD earnings, and some tax increases and oil and tax credit reform.

House Majority Coalition press secretary Mike Mason has said the coalition will consider Walker’s proposal as a starting point in budget discussions, and that it does plan to introduce legislation aimed at reforming oil and tax credits.

The Republican Senate Majority, meanwhile, released its budget goals on Monday, calling for $750 million in cuts from the general fund over the next three years, in step-wise fashion from 5 percent to 3 percent per year.

The Dunleavy plan goes somewhat farther out, calling for $1.1 billion in cuts over four years, starting with $300 million, or 7 percent, each year from fiscal year 2018 through 2020, and then $200 million, or 4.6 percent, in 2021.

The Dunleavy plan would also use current state savings to help fill budget gaps; enact a legislative appropriation limit; protect the PFD using a version of former Gov. Bill Hammond’s 50/50 plan, which puts 50 percent of the PFD Earnings Reserve Account toward dividend check payments and 50 percent toward essential state services; adopt a biennial budget process instead of the current yearly budget; and, create a committee selected by the state house and senate to work with the governor’s office on budget issues between legislative sessions.

Dunleavy said his office asked the PFD Corporation to run projections for the Earnings Reserve Account, from which PFD checks are paid, under the 50/50 plan. He said the corporation ran projections starting in October, with a final report on the projections provided on Monday. He said the PFD Corporation’s numbers show both the total amount paid out to Alaskans, and the total Earnings Reserve Account, would grow over 10 years under the plan.

“Every cut has a constituent group,” Dunleavy said. “It won’t be pleasant or easy.”

But Dunleavy said he thinks it beats taking Alaskans’ PFDs or raising taxes. He said that “taxing our way out” of the budget crisis is a poor proposal for a state that only has a population base, including minors and children, of little more than 730,000 in the first place.

Dunleavy said his long-term sustainable budget plan doesn’t ‘count Alaska’s chickens before they hatch’ – meaning it’s not dependent on recent new discoveries of oil and gas expected to come online with production within the next five years.

“There’s no doubt about it, it’s a conservative approach,” Dunleavy said. “What I really wanted to demonstrate, is that we’ve been hearing the last couple years there’s no way you can come up with a fiscal solution that’s multiyear, unless you take the PFD, possibly reconfigure the permanent fund, and tax. I think what the math shows, is that’s not necessarily true.”

Dunleavy said no plan is going to have long-term success without a complementary effort toward getting health care costs under control, at any level of government. Rising healthcare costs have been a plague on government budgets since before the Affordable Care Act was enacted, and it’s uncertain what the federal landscape will look like on healthcare laws under a repeal or reform scenario.

But at the state level, Dunleavy said he thinks Alaska could see savings with simple measures, such as combining its healthcare plans under one roof, increasing the total pool and reducing costs.

“I do want to say I’m looking forward to more plans, and more ideas,” Dunleavy said of the upcoming legislative session, which starts on Jan. 17. “If that happens, we can take the best of these plans, and come up with an Alaskan solution to this issue, hopefully this year.”