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Legislative leaders unhappy with Walker's budget, but offer few alternatives

  • Author: Nathaniel Herz
  • Updated: September 28, 2016
  • Published December 17, 2015

Alaska's two top legislative leaders gave Gov. Bill Walker's budget proposal a lukewarm reception Thursday, yet offered only vague ideas of their own to fully fix the state's $3.5 billion budget deficit.

In speeches Thursday morning at a breakfast meeting of the Resource Development Council, Senate President Kevin Meyer of Anchorage and House Speaker Mike Chenault of Nikiski, both Republicans, said the Legislature plans to make steeper cuts than the $100 million, or 2.5 percent, that Walker has proposed for the state operating budget.

But their plans to fully close the gap remained elusive, with Chenault proposing perhaps the closest thing to a silver bullet in the form of an idea from a constituent: massive annual state land sales of 1 million acres, at $1,000 an acre, to generate $1 billion a year.

"Why don't we sell land?" Chenault asked the audience. "We've got millions of acres."

The speeches from Meyer and Chenault marked their first times publicly addressing the budget proposal that Walker, a Republican-turned-independent, released last week. Walker's plan would still draw about $400 million from savings this year, but the budget would be fully balanced by 2018.

The governor is proposing a restructuring of the Permanent Fund and a cut to Alaskans' dividends, as well as a new state income tax, to help pay for a budget that this year relies on $3.5 billion in savings to pay for $5.3 billion in spending.

He's also proposing 2.5 percent cuts to state agencies' operating budgets on top of 9 percent cuts last year. Walker's administration defends the smaller reductions by saying that larger ones could drive Alaska into a recession.

Walker's proposed taxes would generate about $450 million: $200 million from the income tax; $112 million from new taxes on alcohol, tobacco and gas; and $150 million from taxes on natural resources and tourism.

Meyer said that approach needed to be "flipped around" — instead, he said, the state should make cuts in the $500 million to $700 million range, and generate $100 million in new revenue.

"I commend the governor for taking the first step, but before we implement any taxes on you and your industry, we need time," Meyer told the audience. "We need time to look at what the impact is going to be."

Some of Meyer's ideas for cuts include changes to the state's $600 million budget for the Medicaid health program for low-income Alaskans — Senate Bill 74, from Sen. Pete Kelly, R-Fairbanks, is projected to save as much as $17 million annually — as well as reforms to the state's justice system that could save an average of $40 million annually over the next decade. Meyer also mentioned changes to the state program that will pay $500 million in oil tax credits this year, though a complete revocation and replacement of that program is included in Walker's proposal.

Meyer also touted a bill from Anchorage Republican Sen. Lesil McGuire, Senate Bill 114, that could generate an additional $2 billion in revenue through its own restructuring of the Permanent Fund.

Chenault, meanwhile, said he hasn't gone through Walker's budget yet.

"I've seen enough of them to figure out where he's at," he added.

Chenault applauded Walker on his initial proposal, and said the ideas for new revenues deserve at least a look, "because I know that we can't cut ourselves out of this problem that we're in."

Ultimately, though, the House will look at "substantially more reductions" than those proposed by Walker, Chenault said, though he didn't identify specific programs that would be targets.

He added that across-the-board cuts "don't work" and said the Legislature will need to target "middle management" and "actual PCN numbers" — the designations for individual state employees' positions.

Chenault's other ideas included the land sales, which, on the scale he's contemplating — 1 million acres annually at $1,000 an acre — could generate enough revenue, $1 billion, to fill a substantial chunk of the budget deficit.

In a brief interview after his speech, Chenault said the idea came from a constituent and that he hasn't decided whether to submit related legislation.

"Might be a good idea," he said.

A spokeswoman for the Alaska Department of Natural Resources, Elizabeth Bluemink, said in an email that 1 million acres represents one-fifth of the state's remaining land entitlement and equates to an area larger than the state of Rhode Island, which is about 777,000 acres.

Since 2008, state land has sold for about $2,500 an acre, with yearly sales by the Division of Mining, Land and Water of 1,050 acres, she said.