It’s not fun to face hard truths, but sometimes it’s necessary to find a solution. So when we decided to host policy town halls where Gov. Mike Dunleavy would discuss his solutions to our state’s budgetary crisis, we knew that they would ignite a passionate debate. But before we get into the details of his budget, it’s important to understand how Alaska got here.
From 1992 to 2007, state and local spending in Alaska grew at a slower pace than the average for all other states. Then, from 2008 to 2015, higher oil prices led to a gusher in state revenues. Flush with cash, our elected officials went on a spending spree.
During that time, our state budget grew at a rate more than twice the national average. We went from spending less than $3 billion in fiscal 2005 to almost $8 billion in 2013. The result is that we now spend more per capita ($13,171 in 2017) than any other state.
When oil prices began to drop around 2015, revenues fell too – but spending remained high, culminating in the downgrading of our state’s credit rating and a $2.8 billion deficit in 2017. Faced with similar situations, Alaska families tend to cut back on non-essential spending. But not Juneau. Instead, they looked for more money to spend.
The Constitutional Budget Reserve and the Statutory Budget Reserve together contained about $18 billion in 2015. Within three years, our state raided these accounts to cover annual deficits, leaving less than $3 billion by fiscal 2018.
It’s been quite a party, but like all parties someone needs to clean up the mess. Our state has a big mess, thanks to the blatant mismanagement that has marked state spending over the past dozen years. That’s where Gov. Michael Dunleavy’s budget proposal comes in. It is a hard-truth approach to an intractable problem.
Gov. Dunleavy understands that our state has a spending problem and has taken decisive action to address it. He understands the alternative is massive deficits and empty savings accounts.
His budget focuses on core services and would cut spending by $1.8 billion from the current fiscal year. Critics have characterized the cuts as “draconian” and “morally bankrupt.” These criticisms miss the point entirely.
Gov. Dunleavy is doing something that his predecessors – and most politicians everywhere – are unwilling to do: make the hard decisions that are needed now to establish priorities and ensure a fiscally sound future.
You might not like some of the individual choices. We don’t like some of them either. But he has refused to sugarcoat the situation, and for that he should be commended. “I think what people are surprised about is that we actually did what we said we were going to do,” Dunleavy said.
The governor’s budget would reduce the deficit and cut the unnecessary reliance on our rainy-day funds. Additional policies being proposed this year, including a Taxpayer’s Bill of Rights and a spending cap, would prevent further taxpayer raids by the politicians in the future. Although there might be short-term sacrifice and difficulties, in the long term this budget, along with curbing our overspending habit, will lay the foundation for fiscal health and a more prosperous state.
In his press conference unveiling the budget, Gov. Dunleavy said, “the government can’t continue to be everything for everyone.” And we couldn’t agree more. In Alaska, that’s the hard truth we all must face.
Ryan McKee is the Alaska state director of Americans for Prosperity.
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