News-Miner opinion: Gov. Mike Dunleavy’s proposed budget for the 2020-2021 fiscal year surely came as a bit of a surprise and relief to many people, especially after the deep reductions he proposed last year.
In an agreement with the Legislature in a drawn-out and contentious process, he relented on some of those reductions and agreed to an Alaska Permanent Fund dividend about half the size of that called for in state law.
The governor now proposes spending roughly the same amount next year as in the current fiscal year’s budget.
Notably, for example, his proposal fully funds K-12 education, which he had proposed cutting significantly in the current budget, and increases funding for the Alaska Court System, whose budget he partially vetoed for the current year because he disagreed with an abortion ruling.
His fiscal 2021 budget, also quite notably, includes paying out a full Alaska Permanent Fund dividend — again expected to be about $3,000 — as well as providing a supplemental dividend payment of $1,400 to make whole this year’s dividend, which the Legislature, and eventually the governor himself, reduced from $3,000 to $1,600.
But what about the revenue side of the equation? That’s where a major concern arises with the governor’s 2020-2021 plan: He proposes withdrawing $1.5 billion from the Constitutional Budget Reserve to help pay the $4.53 billion in general operating expenses that aren’t paid for by other specific sources of funds.
The budget reserve held $1.83 billion at the conclusion of fiscal 2019, which ended June 30, but held $10.1 billion just four years earlier.
We’ve been burning through it as oil revenue dropped and formula-driven expenses and other expenses rose.
Alaska simply doesn’t have the revenue to cover the cost of its government; this year, for the first time, permanent fund earnings were used to help pay the cost of government.
Faced with that, the governor smartly appears to have given up on his insistence that expenditures equal revenue.
Unrestricted general fund revenue, which can be spent on anything, has been falling. Revenue for the current year is expected to be $2.1 billion, a $500 million plummet from the previous fiscal year due to a projected 8.5% decline in the annual average price of oil and a slight decline in oil production, according to a report earlier this month from the Department of Revenue.
For fiscal 2021, the year for which the governor has just introduced a budget, oil revenue is expected to decline by an additional $150 million.
Oil revenue is down, and the governor proposes using $1.1 billion in permanent fund earnings — and it’s still not enough to balance the budget.
But is it wise to balance the budget by nearly draining the once-robust Constitutional Budget Reserve to the point where it looks like a puddle at the bottom of an otherwise empty swimming pool?
What will happen once the reserve is all but empty? How will we pay for things?
With his budget proposal for fiscal 2021, the governor has abandoned another of his beliefs: He said in an interview with the Daily News-Miner in February, just prior to making public his budget for the current fiscal year, that “we’re going to protect and maintain our reserves.”
Alaska is getting pushed further and further to a breaking point.
The deep budget cuts the governor put forward in his first budget earlier this year proved highly unpopular and ignited an effort to recall him from office. That’s likely why there aren’t massive reductions again this year.
But with the governor’s continued resistance to a statewide general sales or income tax, his plan to reduce the budget reserve to a puddle, and with even less oil revenue coming in, what will happen in fiscal 2022? Or fiscal 2023?
The governor himself recognizes the problem of his own budget:
“Even this budget is not sustainable,” he is quoted as saying in a Wednesday news release announcing his budget. “It’s imperative that the Legislature and all Alaskans engage in this conversation to ensure a stable and prosperous future for our state.”
We Alaskans have been talking for a long time. Too many of us, and too many of our elected leaders, have been avoiding or working against a long-term sustainable solution. The conversation that the governor wants needs to be a full one, with him and all Alaskans open to a discussion of all revenue sources.