After years of debating major proposals to close Alaska’s budget gap, the session starts quietly

Gov. Mike Dunleavy gives his State of the State address on Jan. 27. Neither Dunleavy nor the Legislature have made new proposals this years that would significantly close the state’s $1.5 billion budget gap. (Photo by Rashah McChesney/KTOO)

For the last four years, Alaska lawmakers have spent the legislative session focused on major policy proposals aimed at closing the gap between what the state government spends and what it brings in.

But not this year. There are no major proposals being openly debated that would close the budget gap.

Last year, Gov. Mike Dunleavy tried to close a $1.5 billion budget gap by proposing major cuts to public schools, Medicaid, the University of Alaska and the ferry system. The Legislature tried to put a lot of that funding back in to the budget, but in June, the governor vetoed hundreds of millions of dollars, with much of the cuts falling on the university and Medicaid.

He said it was the first step in a two-year plan. But Dunleavy, a Republican, hasn’t proposed more cuts this year.

In fact, his budget proposal would increase spending on state agencies.

Before the session started, he said he wanted to hear from Alaskans about what services they support. He said the focus on cuts last year meant there wasn’t as much attention on other proposals, like his plan to limit state spending in the future.

Also, he recently acknowledged another factor that’s different this year: the recall campaign against him.

“Quite frankly, I’m undergoing a recall because — and I think everybody in the state knows — it had to do with the vetoes,” he said. “It’s a political recall. ”

Jerry McBeath, a retired political scientist at the University of Alaska Fairbanks, said Dunleavy’s political base is opposed to new taxes, or to dividend cuts.

“He won’t need much more beyond the base to, of course, withstand a recall,” McBeath said. “So that’s why he’s stalling and putting things off, and waiting to see what is going to happen.”

McBeath signed the recall application.

Some legislators have expressed an interest in changing the permanent fund dividend formula, which would be one way to close the budget gap. But the concept hasn’t been the focus of hearings in the first three weeks of the session. Neither have taxes.

Senate President Cathy Giessel, R-Anchorage, watches Gov. Mike Dunleavy during his State of the State address on Jan. 27. She said recently that her constituents oppose reintroducing a state income tax. (Photo by Rashah McChesney/KTOO)

Senate President Cathy Giessel, an Anchorage Republican, said her constituents don’t want to pay an income tax, even if that means they’d get more money in dividends.

“Should we institute an income tax that approximately 50% of Alaskans would be liable for … who are working? So, taking money out of their paycheck, for the purpose of distributing large permanent fund dividend checks? And the answer that I’ve gotten from them is a resounding, ‘No. That doesn’t make sense,’” she said.

Legislators said they’re looking for spending cuts. But they said Dunleavy’s administration is in a better position than they are to propose policy changes that would reduce spending.

However, Nome Democratic Rep. Neal Foster said Dunleavy’s proposed budget last year didn’t fully consider the effects of cuts. He sees the current suspension of state ferry service as an example of what happens when administration proposals aren’t thought through.

“A lot of that, I think, is a result of these major cuts that there wasn’t a lot of thought, in terms of what could happen if a ship is laid up and not able to move folks around,” Foster said.

Foster said it’s difficult for the Legislature to spend time on tax or other policy changes when it doesn’t know the governor’s position on them.

Rep. Neil Foster - House Majority press availability - April 3, 2018.
Rep. Neal Foster, D-Nome, speaks at a House majority press availability in 2018. He recently said it’s difficult for the Legislature to spend time on tax or other major policy changes when it doesn’t know the governor’s position on them. (Photo by Skip Gray/KTOO)

“At the end of the day, if it’s just going to be vetoed, then you don’t want to go through all that effort. But if you’re getting some signal from the administration that they’re supportive, then that goes a long way,” he said.

In the long run, Dunleavy wants to limit spending growth. Lawmakers are considering a similar proposal, Senate Bill 104. But that won’t close the gap by itself. Dunleavy said he’s still committed to closing the gap, and that he wasn’t surprised by the problems caused by state spending outpacing revenue.

“A lot of these chickens that have come home to roost, I knew they were coming home. I accepted the job, and I wanted to help fix them,” he said. “And I do and I will.”

For now, Dunleavy is emphasizing that any dividend cuts or tax increases should go to a vote by the public. He also recently expressed a willingness to have major spending cuts go to public votes. No legislators have proposed doing this.

 

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