Alaska News

How to fix Alaska's broken state budget? Business groups pitch solutions, and they don't always agree

Business leaders throughout Alaska have begun publicly staking out positions on the state's fiscal crisis in advance of next year's legislative session. It's clear not all of them agree exactly about how lawmakers should go about the delicate task of balancing revenue with spending.

There's widespread consensus about the crux of the problem: state government is spending billions more than it is bringing in and oil prices are not projected to rise high enough to prevent Alaska from burning through its savings in the next few years. Lawmakers need to make big changes in 2016 to prevent the state from going broke.

But there are variations in fiscal strategies proposed by the business community that, while deceptively subtle, could in fact lead lawmakers to radically different approaches in handling the budget situation during the next session of the Legislature, which begins in mid-January.

In a draft letter addressed to Gov. Bill Walker and sent to all 62 of the state's elected officials, the Alaska State Chamber of Commerce issued the most specific plan so far. The letter includes a list of descending priorities for lawmakers.

The chamber prioritizes cuts to services and programs, followed by capping the Permanent Fund dividend. As a last resort, the plan calls for "exploring new sales or income taxes on working Alaskans and, if necessary, businesses."

As of Wednesday, 19 businesses and business groups had signed the letter.

"The goal here is to show broad alignment among the business community, that while there is a problem, there is also a solution," said Rachael Petro, president and CEO of the Alaska Chamber.

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The Alaska Bankers Association, in a letter dated Aug. 21 to Gov. Walker, House Speaker Mike Chenault and Senate President Kevin Meyer, urged an approach similar to the state chamber's.

But the board of the Anchorage Economic Development Corporation refused to sign the state chamber's letter in favor of its own approach, outlined in a letter released Wednesday.

Unlike the state chamber, AEDC believes lawmakers should consider all options at once in "a measured combination of cuts, new revenues and growth."

"Our board decided not to take a linear step-by-step approach," said Bill Popp, president and CEO of AEDC. "When a business has a down situation like the state does and has the assets available to it like the state does, it comes up with a comprehensive plan to address its issues. That is the tone and direction of our letter."

Another letter issued on Aug. 25 by the Greater Fairbanks Chamber of Commerce was similar to the state chamber's in its emphasis on cuts to services and programs, but took no stance on income, sales or corporate taxes.

"Our board did not oppose signing on to the Alaska Chamber's letter," said Lisa Herbert, executive director for the Fairbanks chamber. "Instead, the Board felt that it was important for our Chamber to have its own fiscal position since we are the premier business advocacy organization for Fairbanks and the Interior."

What is potentially confusing about these letters, and more are certain to come, is that many prominent businesses in the state belong to multiple business organizations. The three major oil companies -- ExxonMobil, BP and ConocoPhillips -- belong to the statewide and Fairbanks chambers of commerce as well as to AEDC.

ConocoPhillips spokeswoman Natalie Lowman did not respond directly to a question about which strategy the company actually supports.

"We would refer you to local economists who are currently studying the issue and/or have weighed in on the various ways to solve the state's budget problems," Lowman wrote in an email.

Katie Marquette, Walker's spokeswoman, did not specifically address whether the administration would have trouble distinguishing where companies stood on the fiscal issue or the scope of influence these and other similar letters might have on its future budget proposals.

"Governor Walker values the input of all stakeholders," she wrote in an email. "The administration will put out a fiscal stability plan later this fall that takes into account the public input that the Governor has received over the past few months. It will include the Governor's proposed spending levels and possible revenue options for the 2017 fiscal budget."

What all business groups seem to agree on is that the state and the Legislature need to act quickly.

"Prolonging the uncertainty has the potential to depress the long-term investment of capital, which ultimately harms Alaska's families and businesses," the Alaska Bankers Association wrote.

Already the fiscal situation has grown serious enough that two of the three major credit ratings agencies in the country are poised to downgrade Alaska's credit rating. In the last year, both Moody's and Standard & Poor's have revised their outlooks for Alaska from stable to negative.

Jeannette Lee Falsey

Jeannette Lee Falsey is a former reporter for Alaska Dispatch News. She left the ADN in 2017.

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