Gov. Mike Dunleavy pitched his plan for giant budget cuts and larger Permanent Fund dividends to the Anchorage Chamber of Commerce on Monday, a continuation of his fiscal roadshow that drew skeptical questions and mixed reactions from the audience.
Asked about a university think-tank study that showed his cuts would mean thousands of job losses and people leaving the state, Dunleavy countered that the approach of recent years hasn’t worked.
Alaska has remained mired in recession with people already leaving, even as the state pulled billions of dollars from savings to balance budgets that were too high, he said. If spending on state services isn’t brought under control, Alaska will have to continually look for more revenues in years to come, he said.
“I know some people think the budget we rolled out was some type of imaginations of a madman, a crazy guy,” Dunleavy told the audience of about 300 business and civic leaders.
But the previous approach under Gov. Bill Walker using Alaska Permanent Fund earnings to help balance the budget, resulting in smaller dividend checks, hasn’t received support from the public, he said.
“We are asking the people of Alaska, do you want us to reduce your budget — yes dramatically — without taxation, without touching the PFD, or not?” he said. “It’s been a good discussion.”
The event at the Dena’ina convention center was similar to meetings that Dunleavy and his staff have held around the state since March, with a presentation of his plan and the audience submitting written questions.
Dunleavy, speaking for about 40 minutes and leaving room for seven questions, highlighted his three constitutional amendments as critical to the plan: No new taxes without a public vote, limiting state spending, and enshrining the Permanent Fund Dividend in the constitution.
There were none of the protests that marked five of the meetings in March sponsored by the Alaska arm of Americans for Prosperity, an anti-tax group founded by the billionaire Koch brothers from Kansas.
This time the meeting was sponsored by the chamber, one of about 20 that have been held by civic or business groups in Alaska, not AFP, said Matt Shuckerow, a spokesman for the governor.
Some audience members said the huge cuts will endanger the economy, extending the recession that’s been marked by Alaska having the highest unemployment rate in the U.S.
Others agreed with the governor’s message, saying a reduced budget will bring stability and new investment to Alaska that will pay off over time.
The board of directors of the Anchorage Economic Development Corp. believes the governor’s proposed budget is “too steep in cuts and not balanced or measured," said Bill Popp, president of AEDC.
Attracting new business requires state investment and public-private partnerships to create quality schools, universities and improvements to the health care system, he said. The proposed cuts are “very concerning,” he said.
“We are at a point now where we need to start thinking about what we need to do to attract investments,” Popp said.
AEDC supports “targeted, measured cuts," and continued use of some earnings from the $65 billion Alaska Permanent Fund to help close the deficit, he said. A discussion about new taxes, such as a statewide sales or property tax, should be on the table to determine which approach is best.
A “blend" of new revenues with careful reductions will give the business community confidence in the economy, Popp said.
Larry Baker, a former Alaska state representative who owns BSI, a commercial real estate and consulting firm in Anchorage, said he supports Dunleavy’s budget. It could initially lead to job losses, but creating a sustainable budget will attract new companies, bringing long-term benefits that outweigh the negatives, he said.
He said the governor is right to present a historic look at spending in Alaska — a standard part of the roadshow speech — to argue that state budgets became unsustainable after oil prices and state income spiked a decade ago.
"For the past many years our spend has exceeded our revenue and we need to get our house in order,” Baker said.
Dunleavy has presented a plan that’s “sustainable” over the long run, said Tim Gallagher, general manager in Alaska for HDR, providing engineering, consulting, and construction-related services
“I fully support the approach,” he said.
Cathy Sandeen, chancellor for the University of Alaska Anchorage, said Dunleavy’s drastic cuts to higher education will hurt the broader economy.
The University of Alaska system faces a $134 million cut in the governor’s budget, a drop in state support of about 40 percent.
“We need to be great stewards of the money we get from the state, but to drastically cut the university within a one-year period, or it’s even a matter of months now, would have harmful effects on the economy in a number of ways,” she said. “We do research that supports various businesses and other industries in this state that help solve Alaska’s problems. We also support the workforce that Alaska needs.”
Correction: An earlier version of this article incorrectly said that the University of Alaska system faces a $134 million cut, or about 40 percent of its total budget. The article should have said the proposed cut represents about 40 percent of the state’s support for the system.