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State budget targets are easy, but politicians need to identify cuts first

  • Author: Dermot Cole
    | Opinion
  • Updated: January 12, 2017
  • Published January 12, 2017

It was a year ago Alaska state Sen. Mike Dunleavy, R-Wasilla, a member of the Senate Finance Committee, said if we could only get the general fund budget down to $4.5 billion, the state would have a sustainable budget with no new taxes and no reduction in the Permanent Fund dividend.

As he wrote on Facebook, "we should be in a fairly good position to have a sustainable budget of $4.5 billion going into the future that could be sustained through the revenues we currently bring in as well as a draw on the earnings reserve account" of the Permanent Fund.

It was what everyone wanted to hear.

The vetoes by Gov. Bill Walker last summer didn't go over well in some quarters, but they helped push general fund spending below the $4.5 billion target identified by Dunleavy and many other Republicans as the magic number.

We would have arrived at sustainable nirvana by now, but for one thing — the math didn't work then and it doesn't work now.

A year has passed and Dunleavy is still making the case for what he says is a sustainable budget with no new taxes and no changes to the dividend, but the new magic budget target is $3.2 billion.

He won't say what programs he would eliminate or scale back to be able to slice $1.1 billion from spending over the next four  years, which makes this a meaningless exercise.

His 10-year budget outlook also says the spending total would remain at $3.2 billion in 2027, by which time inflation will have cut hundreds of millions in value from the alleged sustainable number.

I understand why he doesn't want to come out and say that he wants to get rid of maybe 15,000 direct and indirect jobs and reduce services Alaskans have come to expect from state and local government.

To do so would trigger an immediate backlash that would make life uncomfortable for every state politician.

The Senate majority, which includes Dunleavy, has also declined to identify what state services it wants to eliminate or reduce with its plan to cut spending by $750 million over the next three years.

Fairbanks Sen. Pete Kelly gave a speech recently in which he said the 2017 budget fight presents a clash of capitalism, which he represents, against the onslaught of socialism. I think that's his way of saying he still opposes an income tax.

At a time when the Alaska economy has dipped into recession — one that could be deep and prolonged — people are worried about the future. We need leadership and collaboration in Juneau, not imaginary enemies. The House isn't going to accept the Senate budget approach because there are conflicting viewpoints among Alaskans.

The Senate leaders should not be shy. If they can't explain the economic and social consequences of cutting $750 million or $1 billion in the coming years, perhaps they picked those numbers only because they sound good.

Dunleavy would be happy if people stopped asking "What do you want to cut?" as the first question.

Instead, he wants to put a simple measure before the voters about whether they want to constrain the size of government.

There's no need to waste money printing the ballots. We already know the answer if you ask the question that way.

While we're at it, let's ask voters if they like the idea of a big increase in property taxes as the state shifts more responsibilities for schools to local government? Or if more Alaska State Troopers are needed in the Mat-Su?

How about subsidies for the oil industry? This debate cannot be condensed to a single question.

The size of the state budget and the level of state services are interconnected. It makes no sense to say we need a spending cap before politicians can explain the impact of their proposed cuts on education, public safety, health care, road maintenance, etc.

In a radio interview with Brad Keithley, who shares Dunleavy's point of view on most of this, the senator said once we know the size of government, we can cut programs to fit.

"It's a lockbox. And then you kind of duke it out, if you need to … inside that lockbox," said Dunleavy, channeling former lockbox leader Al Gore.

One of the important related issues in this debate is what part of earnings from the Permanent Fund should be used to pay for dividends, what part for government services and whether an income tax would boost both of those concepts. The split is a big decision that needs more analysis.

Keithley, who leads an effort he calls Alaskans for Sustainable Budgets, promotes the so-called 50/50 plan — backed by Dunleavy and others — to continue using half of the earnings on dividends and to start using half for government services, instead of saving it.

In the long run, I believe that plan could lead to a decline in the value of the Permanent Fund principal because of inflation, a topic I'll deal with at a later date.

As to budget cuts, I don't agree with the approach by Dunleavy or the Senate majority, but I'm glad to see their numbers, which will start an important discussion with Alaskans about the future.

Legislators have the chance to explain the extensive public service reductions they envision over the next few years and how much this will contribute to the recession and increased unemployment.

Understanding those impacts is essential to developing a real sustainable budget, which means the politicians have to tell us what programs they want to cut.

Columnist Dermot Cole can be reached at 

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