As Alaskans, we pride ourselves on our rugged individuality. In certain unfortunate situations, that individuality manifests as an inability to compromise, or worse yet, an inability to form partnerships and find solutions. With the recent and steady advent of lower oil prices, we find ourselves in the unusual position of agreeing that the state of Alaska, and all Alaskans, have a huge fiscal problem.
Just as quickly as we agree on the problem, the finger pointing begins and any hope for lasting solutions wane.
What do we want from 2015? Is this the year we assign blame for who’s overspending where? Or do we want 2015 to be the year we made tough choices, and working together, we put Alaska on a sustainable spending path?
Alaska businesses create jobs and wealth and fund over 95 percent of the state’s budget. Alaska’s future depends on a healthy economy and a healthy economy requires a good business climate. New, small, medium and large — our businesses are Alaska’s story.
The Alaska Chamber has long supported a reduction in state spending to sustainable levels. This has been a real challenge given that the state’s unrestricted general fund budget, unlike mine or probably yours, has grown 230 percent in 10 short years. Last fall, the Chamber Board of Directors selected state sustainable spending as one of its two top priorities.
We should be encouraged by the fact that many of our elected officials are now acknowledging the problem and are focused on fixing it. What they need from us is understanding, ideas, and support as they make some difficult and potentially unpopular decisions on where and how Alaska spends money. On top of the list of things that we can’tafford are finger pointing and sacred cows.
The Walker/Mallott Administration began its Transition Conference with a panel presentation regarding Alaska’s fiscal situation. The Governor revealed a bare-bones capital budget with a commitment to revise his operating budget, and has asked each department and Alaskans to identify opportunities to save. That’s a reasonable framework from which to start.
Last year, the state legislature trimmed unrestricted general-fund spending in unsustainable fiscal year 2015 slightly from the previous year. It’s important to note that they did this without the broad consensus that Alaska is on the brink of fiscal crises. Recently, legislative leadership acknowledged the reality of FY 2015 and beyond. They also met with the governor and articulated their desire to find solutions to the FY 2015 deficit and the projected FY 2016 deficit. Again, a reasonable start.
The state currently faces a $3.8 billion deficit — a significant fiscal situation. The primary drivers are excessive spending and lower-than-anticipated oil prices. This makes establishing a sustainable state budget no easy task, particularly with the unpredictability of oil prices. Given that the oil industry funds 90 percent of the state’s spending, that volatility should not be ignored.
A sustainable budget should match spending levels to long-term revenues. There is little we can do about the volatile nature of oil prices, which means we must focus on what we can control — spending. Every state service deserves our attention. Is it necessary? Does it achieve its goal? Is it as efficient as it could be?
State spending must be surgically trimmed to ensure that services allowing businesses to generate revenue to the state continue. Alaska businesses can’t simply survive, they must grow. State government cannot “service” Alaska to fiscal security. Our private sector companies bear that responsibility, and state spending must support those private efforts.
Albeit uncomfortable, and far more cumbersome than pointing fingers, we must come together as Alaskans and do what businesses and households do daily — live within our means. Let’s write a new story for the next generation — one in which citizens, businesses, and the state government that serves us, live within our means.
Let’s make 2015 be the year we begin the hard work of making Alaska the best place to do business.
Rachael Petro is the President and CEO of the Alaska State Chamber of Commerce.