Opinions

Alaska's experiment in 'state socialism' puts us all at risk

The weekend of Sept. 12th, I attended the annual Institute of the North Alaska Dialogue in Seward. This was the first dialogue I have taken part in and I thoroughly enjoyed the discourse and the high caliber of people who participated. I specifically wanted to attend this year's dialogue because of one of the discussion groups lead by Brad Keithley: "How can Alaskan leaders anticipate and plan for an uncertain and changing fiscal future?"

I have studied and been acutely aware of the fiscal issues facing Alaska since 2011. Most people who pay attention are aware the state is in a fiscal mess, many others have no idea. Spending is, and has been, increasing for some time and revenues, the vast majority of which come from oil taxes, have been falling.

We have been engaged in deficit spending for the last three fiscal years and have already burned through 30 percent of our savings in the Constitutional Budget Reserve and Statutory Budget Reserve. According to the University of Alaska Anchorage Institute of Social and Economic Research, the state will be out of savings in less than 10 years. And then what?

One important thing to note is that we have no control of the price of oil. A drop in the price of a barrel of oil could drastically change these assumptions. Conversely, rising oil prices, like we experienced in 2008, could improve the forecast. However, to solve our fiscal mess, as has happened in the past, the price would have to go up so much it would have catastrophic effects on the overall economy. Imagine what would happen if a barrel of oil was $180/barrel? We can't expect to get bailed out again by high oil prices.

The group I participated in took a simple approach to solving this problem. Some of the conclusions were simple: admit we have a problem, educate the public on the issue, reduce state spending, state co-investment in revenue producing projects (I am doubtful there really is any), consider instituting a broad-based tax, which cannot solve this problem, and develop a plan to prioritize spending.

The best part of the dialogue was that there was a diverse group of Alaskans who all had a unique perspective on Alaska and the many issues facing the state. I had conversations with many people about our fiscal problems. Up to this point, I have always viewed this issue as simple, yet hard to solve because legislators are unwilling to make the difficult decisions to solve the problem. But why is that? Last weekend gave me some unique insight to this problem that I spent a lot of time reflecting on.

The real problem facing our state is that Alaskans demand much more from government than we are willing or able to pay for. Before there was oil, there was an income tax, school head tax and other taxes that Alaskans paid to fund government. Then oil came along and what accompanied it was a huge boom and billions of dollars to the state coffers. Which brings me to my main point, oil has brought with it state socialism and a culture in which Alaskans rely on and expect the state to take action to prop up the economy.

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Phrases like "It's our oil" and "We are an owner state" are commonly said in Alaska. Common ownership of our resources is guaranteed in our Constitution but let's not kid ourselves, the state makes decisions every day that the average Alaskan has no say in. We don't get to vote on the decisions the state makes. Many people say Alaska is a socialist state because of the Permanent Fund dividend. The truth is we are not socialist by definition, our economic system can better be described as state socialism. The difference being that under true socialism there is little or no state. The nature of state socialism in Alaska is pervasive, systemic and touches everyone. Alaskans love state spending, and many depend on it. This is a major problem.

Rural Alaskans, and even some urban Alaskans, rely on the dividend to pay utilities or subsidize other parts of their life. Nonprofits all over the state rely on state funding or grants to exist. Many companies or contractors rely on state contracts to keep their business going. People who work in "economic development" around the state seem to share the mentality that it is up to the state to fund their projects. The problem is almost everyone in Alaska depends on state spending to thrive or exist, this creates a false economy and is not sustainable.

People can, and should, discuss how state socialism in Alaska works, or if it can. But first we have to admit that this is the kind of economic system we have. The result of this system is everyone expects the state to fund their project or organization. Legislators have a hard time saying no because it is unpopular and for a long time we had the money. Other states are not so fortunate, and organizations have to raise money from private sources to do so much of what Alaskans expect the state to pay for.

We need to have a discussion about prioritizing spending to avoid running out of savings and then being forced to do it. It is really no different from a family. There are necessities and nice things, spending savings or going into debt for nice things is unwise. Reducing the capital budget is a good place to start. Projects like the new UAA sports arena or grants to nonprofits should be greatly reduced or eliminated. If we want these things, then we should stop relying on the state and start depending on ourselves to donate to causes we deem important. The governor should appoint commissioners with a clear mandate that they need to find savings in their departments. An anonymous whistleblower program should also be started that rewards state employees for reporting waste. This is not rocket science, it just requires people who understand the problem and are serious about solving it.

The collective mentality is that we need to cut, just not my project or organization. The result of that mentality is upward pressure on spending continues and it keeps going up. We need to understand that demanding more government than we can pay for is not only unsustainable, it is wrong. The truth is, we are all to blame for our fiscal crisis and the only way to solve it is to elect leaders that are serious about dealing with the problem and have the courage to say no, we can no longer afford this. It won't be easy, but let me be clear, it is not a matter of if we reduce spending, it is a matter of when we decide to.

Jeff Landfield has lived in Anchorage since 2004. He spends time advocating for limited government and market-based reforms.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com.

Jeff Landfield

Jeff Landfield was a delegate to the 2008 Alaska Republican Convention. He is currently running as a Republican for the Alaska House of Representatives in newly formed District 22. He holds a BA in history with a minor in economics from UAA. He has lived in Alaska since 2004.

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