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There’s a real choice for the shape of Alaska among the three governor candidates

  • Author: Charles Wohlforth
    | Opinion
  • Updated: August 28, 2018
  • Published August 28, 2018

Voters this fall could decide Alaska's future for a generation from among three distinct choices for governor, each a candidate with a different fiscal plan.

State government dominates our unique economy by controlling the flows of money from oil production and the Alaska Permanent Fund. The economy says how many of us can afford to live here and who, and state services such as education and public safety determine much of our quality of life.

After three years of recession and political frustration, this year's choice has the feel of something permanent. If the next governor manages to change the constitution, dismantle state government, or spend down savings, there won't be a second chance. Alaska's path will be set.

Please understand these choices before you vote for independent Gov. Bill Walker or either of his challengers, Republican Mike Dunleavy or Democrat Mark Begich.

Obviously, I have preferences, but today I'm writing in an analytical mode, as someone who has spent many years studying Alaska's politics and finances.

The challengers' fiscal plans are vague, but they are more than slogans. Each has priorities that set a direction. And what's left out tells a lot, too.

Walker had to lay out his ideas three years ago, when state finances collapsed and leadership required hard choices. Voters can evaluate his goals and his effectiveness in making them happen.

Each candidate's plan would affect Alaska Permanent Fund dividends, potential taxes, and the services the state can provide. Alaskans could begin paying for services through taxes, which would permanently change our politics, or continue being only consumers of them.

The choices also carry risk. Alaska's finances remain precarious, vulnerable to changes in oil prices and the bull or bear psychology of Wall Street traders.

And our Permanent Fund remains vulnerable to the whims of legislators. More than a third is constitutionally available for them to spend. Without a successful fiscal plan, they could exhaust that money, ending the dividend and threatening state insolvency.

Dunleavy's plan prioritizes maximum dividends and minimum taxes. He would make that happen with drastic budget cuts and by relying on oil revenue and fund investment returns. If the cuts or revenues don't materialize, the legislature could run through that vulnerable one-third of the fund.

Begich's plan uses a constitutional amendment to lock in a limited spend of fund earnings for dividends and education. If the amendment passed, the fund would be safe, but the state would be short of revenue. Since he opposes deep spending cuts, that likely means new taxes on oil or the public.

Walker's plan three years ago included a little of everything, including budget cuts, using fund earnings, reductions to the dividend, oil tax changes, and broad-based taxes. He made some progress on most of that, except broad-based taxes, but not enough. The system remains unbalanced and vulnerable.

We muddled through, running down state savings accounts until the legislature had no choice but to spend some Permanent Fund earnings to close most of the budget deficit. The crisis seemed to pass.

Walker recognizes the work isn't done, he told me earlier this month. He still supports a broad-based tax such as an income tax to close the rest of the gap and to link economic growth to state spending, connecting the level of services to need rather than only to varying oil prices or investment returns.

But he recognized that the heat is off the legislature. It will be easier for legislators to hope oil revenue increases on its own.

"When there is another option out there, it becomes more difficult," Walker said. "It sort of depends upon the election. It depends on who comes back."

Judging by the punishment incumbents received in the primary, it seems doubtful the legislature will become more enthusiastic about taxes.

That demonstrates the hazard of muddling through. With politics annually deciding the size of the dividend and the amount of fund earnings the state will spend, there's a long-term risk of muddling through into insolvency.

Dunleavy's campaign material on the fiscal gap is laughably vague and he did not return my calls. But he points to a plan he presented as a state senator in early 2017.

Dunleavy's plan would have cut the budget deeply to increase the dividend and avoid taxes while advancing a constitutional spending limit in the future. Nothing in his plan passed the legislature and he resigned his seat before the big votes on the solution that did pass.

He hasn't presented specifics on these cuts. Doing so would alienate voters. The cuts simply are too big and would be unpopular, and that's why similar, smaller cuts couldn't get through the legislature.

But Dunleavy is leading in the polls. Without knowing the trade-offs, why shouldn't voters support someone who wants to give them more money and provide services without taxes?

Begich's constitutional amendment would allow the legislature to take only a set percentage of the Permanent Fund's value annually, called a POMV, splitting that amount between spending (allocated for education) and the dividend. His dividend would be about midway in size between Walker's and Dunleavy's.

Such an amendment could pass the voters, but would only get on the ballot by a two-thirds vote of the legislature, an unlikely event in the current political climate (the same is true of Dunleavy's constitutional spending limit). But if Begich's amendment did pass, the fund and dividend would be safe.

"Once we're all done taking that money off the table, now they're going to have to make the tough calls," Begich said.

He doesn't want to say what those calls would be, but we can guess.

There's a symmetry to the three approaches. Dunleavy and Begich both have constitutional amendments, one to protect the Permanent Fund and dividend and the other to hold down spending.

If the voters give either idea a big mandate, an amendment could happen. Otherwise, legislators would never put an amendment on the ballot and limit their own choices.

That would leave us with Walker's approach, to continue muddling through.

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