Walker’s budget proposal draws fire

WASILLA — Gov. Bill Walker released his 10-year fiscal forecast and proposed FY 2018 budget on Thursday, and immediately drew criticism. Opponents chided the plan for dipping into the fund that pays Alaskans’ annual Permanent Fund Dividend checks, and not doing enough, in their view, to make specific reductions in government spending.

“I am disappointed the administration did not take their job more seriously and identify areas that should be cut, trimmed or eliminated,” said state senator Anna MacKinnon in a press release from the Republican Senate Majority. MacKinnon, who is co-chair of the Senate Finance Committee, said the body “will continue the work our caucus started during the 29th Legislature.”

During the last session, MacKinnon supported a restructuring of the PFD, something advocated for by Walker. A PFD restructuring bill passed the senate but failed in the house.

Brad Keithley, an oil and gas analyst, has long proposed using a version of former Governor Jay Hammond’s “50/50 Plan,” which he says could raise $1.5 billion in revenues by capitalizing on PFD earnings without cutting dividend payments or adding new taxes.

“Good Lord. The Administration’s fiscal forecast is wrong from the very first sentence,” Keithley wrote in a post that appeared on his blog and his Facebook. He challenged the administration’s statement that Alaska’s fiscal woes are due to oil boom-and-bust cycles, arguing instead that the bigger problem is the state government “spending above long-term sustainable budget levels.”

Wasilla Republican Senator Mike Dunleavy registered a swift response the day after the governor’s proposal came out.

“Upon review, it would appear Governor Walker is relying heavily upon the use of the Permanent Fund to balance his budget instead of looking for reductions to government spending,” Dunleavy said in a press release. “His proposal is to take roughly $5 billion from the earnings reserve account of the Permanent Fund in one budget – which is really $5.9 billion if you count the Governor’s appropriation for this year’s $1,000 PFD and inflation proofing. This single piece of legislation removes almost $6 billion from the Permanent Fund – 10 percent of the fund’s value – in one fell swoop.”

Another Mat-Su legislator, Alaska House representative-elect David Eastman, said in a phone interview, “My initial impressions are that the governor is taking the shortcut.” He said he supports a long-term sustainable budget and reduced government spending.

“Now is certainly an opportunity for people who are concerned with the budget and government spending to be engaged, and be in close contact with their elected representatives,” Eastman said.

The House Majority, a coalition of 17 Democrats, two independents and three Republicans, sent out a release indicating it would give the Walker proposal a fair shake and use it as a starting point for discussion.

House Majority Coalition press secretary Mike Mason said on Saturday that the group does not yet have an official position on PFD restructuring.

The majority does plan to introduce some kind of legislation that targets oil tax credits, he said. The credits have been criticized by some as a subsidy the state can’t afford, and lauded by others as an engine for inducing oil and gas exploration and investment in the state.

In addition to calling for PFD restructuring, the budget released by the governor’s office calls for deleting 795 state jobs, freezing pay increases for non-union workers, and making changes in state workers’ benefits, including having them pay a higher portion of their healthcare costs.

The proposed budget also falls nearly $900 million short of paying for government.

In a press release, the governor pledged to take a pay cut next year starting in July. The state currently pays its governor $145,000. The pay reduction would amount to $48,000, leaving Walker with an annual salary of $97,000.

“While my pay cut will certainly not balance the state’s budget,” Walker said in a press release, “I believe it is important to lead by example. These are tough times for many Alaskans and fixing the state’s deficit requires that we all make sacrifices and pull together.”

Paul Seaton, a Republican member of the house majority, who is co-chair of the operating budget committee, said the bipartisan majority was formed in the first place with the goal of “passing a comprehensive, sustainable fiscal plan.”

Seaton said PFD restructuring, state sales or income tax, and budget cuts including reductions in oil tax credits are likely to all be part of passing a sustainable budget.

When asked about plans growing in popularity among the public that promise to steer the state through its fiscal crisis without reducing PFDs – Keithley’s rejiggered 50/50 plan, and the Goldsmith plan, by economist Scott Goldsmith and originally published by Institute of Social and Economic Research – Seaton said the house majority would look at any plan that goes to committee, but added that it’s time for Alaskans to pay for their services.

“Alaska’s been lucky that we have one industry pay for all the services people get, but with the downturn in oil prices, it just doesn’t work,” Seaton said. “Unless you cut the budget by half or something else, in which case you’re gonna see the 1980s — where people were turning their keys to their houses into the banks because the devaluation would mean they’d be underwater on their houses, or significantly cutting education. You can theoretically say, ‘cut the budget,’ but constitutionally, we have to provide education and public safety.”

The next legislative session begins on January 17.