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Q&A with GOP gubernatorial candidates Dunleavy and Treadwell: How would you create a sustainable operating budget?


Mead Treadwell:

The first thing I would say is that we have made a change so that we are using part of the Permanent Fund income for avoiding taxes. I want to have a full dividend, make sure that we're not taking from the dividend, but I have championed the POMV (percent of market value) concept as a member of Commonwealth North's board, as president of Commonwealth North, since 2007.

And what that means is, you build the Permanent Fund as big as you can build it. You take just 5 percent of it every year, that's exactly what the Gates Foundation does, the Ford Foundation does. We take that 5 percent, say if it's a $70 billion Permanent Fund, that's $3.5 billion. You inflation proof and then split the difference between the dividend — and it will be a growing dividend, not a capped dividend — and avoiding taxes.

I want to build up the revenue the state gets from the corporate income tax. When we export fire logs as opposed to furniture. When we export raw salmon as opposed to salmon fillet that's ready to go into the supermarket. When we export raw minerals or natural gas — raw as opposed to plastics or some sort of finished products, we're exporting jobs. We're exporting jobs to Russia when we let them get ahead of us on LNG. All those things can build up the corporate income tax revenue.

And, when I was lieutenant governor I'd meet with my counterparts around the country. They're all actively involved in bringing factories, manufacturing, value-added plants to their states. We don't do that. We barely even talk anymore about value added. So that's where we have to grow revenue. I don't want to take it out of your pocket directly as an income tax. I think the sales tax that we have is really reserved for municipalities. So we're going to diversify revenue by growing revenues from corporate income taxes, don't have to change the rate, getting more oil in the pipeline. We had these oil tax incentives that I championed, again, as lieutenant governor. We've lost four drilling seasons and we've got to get more oil in the pipeline. So it's those two things.

The last thing I'll say just real fast is, I've been a tech entrepreneur. There's lots of things that Alaskans can do with innovation and diversifying the economy and that's going to grow the economy too.

Mike Dunleavy:

So all fiscal plans that have been talked about in the end fail, unless the operating budget, its growth is contained.

And in the numbers that I've run and others have run, if we can contain this operating budget at about 2 percent growth per year with a baseline ideally of $4.3 billion, we have a chance to grow this economy and be able to pay for the budgets going forward. So at an operating budget of about 4.3, you're looking at about $80 some million growth per year at 2 percent.

We can pay for this through the CBR's (Constitutional Budget Reserve's) fees and settlements that it receives on average every year, about $100 million. We wouldn't have to go to the corpus of the CBR to do this.

If we don't cap the growth of the budget, and it continues to grow at 3, 5, 6, 7 percent — all fiscal plans fail. Within a few short years, we'll burn through the $2.7 billion in its entirety that SB26 provided with its POMV approach to the Permanent Fund and/or we'll have to begin to tax. So, by containing the budget, you slow the growth, you slow the growth of the budget down — the operating budget. And it also could afford you a growing capital budget to help grow ourselves out of this predicament that we're in.

The only way we're going to have a long-term sustainability in the state of Alaska is if we put our resources to work. For example, I was just up in Tok, Alaska, a week ago, looking at a logging operation up there.

But for the most part, we don't manage our resources well in the state of Alaska. Timber, for example. What we do now in the state of Alaska is we basically let the timber just burn or rot and fall down. We don't put it to use. We don't monetize it.

The 300,000 barrels of oil that we have recently discovered on the North Slope, we need to get that into the pipeline as soon as possible. That will lower the tariff costs for the pipeline, providing more money for the state, royalties and taxes. This will provide the revenue we need for our programs.

So at this stage of the game, with oil revenues, prices of oil at about $70 a barrel, we may not have to cut like we had to or we envisioned a few years ago when oil was at $26 a barrel.

If we can contain the size of the operating budget, contain its growth — again to 2 percent a year — we could grow ourselves out of this.

More questions with gubernatorial candidates Dunleavy and Treadwell:

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