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Going broke

 

budget inflation

Alaska’s oil-fueled budget/Alaska Legislative Affairs data

News analysis

 

Alaska is Alice Rogoff, and if you watched the rise, the fall and the implosion of what was the Alaska Dispatch News, you know how that story ended.

Where it began was with Rogoff growing up in a comfortable, upper-class family, marrying David Rubenstein who eventually earned more money than many banks, and as a result, never needing to learn how to work for a living.

The parallel with Alaska – a state of which Rogoff so badly wanted to be part – isn’t perfect, but it’s close.

Alaska struggled and clawed for survival before oil was struck on the North Slope in 1968, but ever since the crude started flowing in 1977, Alaskans have been living easy on the money of oil industry’s labor.

Forty-two years is a long time to live outside reality. People become  conditioned to the idea life will always be easy and the money will always be there.

Certainly Rogoff did.

Money was not something she earned. It was something given to her to spend because of who she was, and she spent it with good intentions. Lots and lots of good intentions.

Rogoff might have some flaws on a personal level. She still hasn’t paid AlaskaDispatch.com editor Tony Hopfinger, the man who helped make real her dream of becoming an Alaska somebody, the money an Alaska jury decided she owes him.

But on a societal level, she wanted to help people, especially Alaska’s Native people

Alaskans have always been similarly well-intentioned. About 60 cents of every dollar the states spends today goes to finance education, pay for healthcare for low-income residents, to support welfare, or to  provide for pensions.

Why?

Because Alaskans – left, center or right – want all the state’s children to be educated, want everyone to survive illness, want to keep the poor from starving, and want to thank those who worked to build the state.

These are good intentions spawned by 20th Century America prosperity. They are, likewise, the good intentions of having the wealth to have good intentions.

For thousands of years before the 20th Century, Alaskans educated their own children, fought off illness as best they could without medical providers, left the weak behind to die, and had no clue as to the meaning of the word “pension.”

And for almost two decades after the Territory of Alaska was replaced by the State of Alaska, good intentions were constrained by fiscal realities.

Income tax

Before oil started gushing in the north, Alaska state government survived mainly on an income tax and spent about $500 million per year. Were the spending of 1975 adjusted for inflation and population growth and projected forward to today, the state would be spending about $2 billion.

The state is spending more than twice that now.

Why? Because it can. Because we can.

The state of Alaska, like Rogoff, is rich. As of the end of February, we were sitting on $63.9 billion in the Permanent Fund.

Despite this, Republican Gov. Mike Dunleavy entered office proposing $1.6 billion in budget cuts. He has been taking the predictable public beating ever since.

All politicians agree there is fat in the state budget right up until the time it comes time to go on a diet, and then a lot of the fat becomes muscle.  Anyone who has ever gone on a diet can understand the problem.

Dieting is difficult. You have to control your desires. And Alaskans have spent decades eating what they want.

Not only that, there is little real reason to diet. Yes, it might make the budget look better, but it’s not like we’re going to die tomorrow if we don’t get things under control.

If the state goes on doing what it is doing and maintains itself by emptying the Constitutional Budget Reserve Fund (CBRF) and drawing down the state’s Earning Reserve, it can continue to pay full Permanent Fund Dividends and survive through fiscal year 2028 and still be sitting on $63 billion in the Permanent Fund, according to the State of Alaska Fiscal Plan For FY20 – FY29 released by the Dunleavy administration this week. 

“With no accessible savings, this scenario leaves few options and fewer assets for future Alaskans,” the plan adds. “Taxes or budget cuts would still be required, but the conversation would just be delayed for a decade.

“The short-term benefits are highest in this scenario, as no money is removed from the current economy, and PFDs are greater than in fiscal year 2019(FY19). As a result, total household income in FY20 increases by about $1.3 billion, and no subtractive impacts are felt by the current economy.”

(The Dunleavy fiscal plan could be found here: https://www.omb.alaska.gov/ombfiles/20_budget/PDFs/FY2020-10yr-Plan-Final.pdffbclid=IwAR1YbTKA5y5yFbkOKX1g9Rq4HsLfOIrZAi0vA7OfL_tPTHNO3hKWGPJS264)

Miracles

The Dunleavy plan refers to this as the “kick the can down the road” approach. It is similar to Rogoff’s “hope for a miracle” plan that envisioned people lining up to buy newspapers in the Age of the Internet.

The kick-the-can-down-the-road approach eventually needs a miracle, too – a big jump in oil prices.

This probably has a better chance than Rogoff’s miracle. BP – one of the oil majors – was once projecting $100 per barrel oil would become the norm.  The price today is moving around $65 per barrel, and most forecasts predict it will stay below $70 per barrel for a long time.

Given this, Dunleavy has, for better or worse, rejected the miracle gamble.

“The governor does not believe it is just to saddle future generations with the questionable fiscal decisions of today,” the fiscal plan says. “Therefore, he does not support this scenario.”

Instead his proposal is to cut. Democrat legislators have talked about new taxes.

Neither option is all that good. The Dunleavy plan does offer a fourth option but promptly rejects that call for the use of Permanent Fund earnings to offset the deficit in order to maintain state spending.

“This scenario inevitably leads to the demise of the PFD program, as increased government spending eventually consumes the entire” Permanent Fund draw, the plan says. “Ultimately, this scenario still requires a future solution to the same problems currently facing the state.”

The fiscal plan is 20 pages long and simplifies the state’s budget issue about as much as it can be simplified. It is doubtful many Alaskans will read the document.

The plan also highlights the one thing on which all economists and most politicians do agree.

“…There is no simple solution to addressing the state’s budget deficit. Every
option comes at a cost. The question is,  ‘What trade-offs are we willing to accept?’

“While reductions in state services are difficult decisions, it is important to recognize the cost of not addressing the structural gap between revenues and expenditures.”

Dunleavy’s big argument for majors cuts is a long-game plan. The economy takes a hit in the short-term, but the restoration of the Permanent Fund Dividends help offset the damage and once the economy stabilizes in a state with a trimmed down bureaucracy, a cap on spending (another Dunleavy proposal) and requirements for Alaskan approval of any new taxes, the state will start to grow again.

“…The Governor’s plan signals to those wishing to invest in Alaska that it has its fiscal house is in order, and is open for business. The plan results in higher levels of household income to support a higher
standard of living, avoids taxes that would hinder economic growth, and ensures that Alaskans continue to receive their individual share of Alaska’s resource wealth,” the plan argues. “Removing uncertainty regarding future taxes will promote further investment and allow Alaska’s economy to grow and diversify.”

That conclusion is speculative. Economically, it’s true that lower taxes and fiscal certainties encourage business investment, but Alaska has a lot of natural disincentives to business: it’s far from markets; the cost-of-living is high; the pool of skilled workers is small; and more.

Signalling that Alaska is open for business might encourage investment in new Alaska business, but there’s no guarantee. And it’s hard to see a promise of a better times in the future causing any government employees to willingly give up their jobs today.

There are reasons budget cutting is hard.

Rogoff couldn’t do it even though she had complete control over her business. She ended up losing it all in bankruptcy.

Dunleavy has only limited control over the state budget and is facing a tsunami of opposition to his proposed budget cuts. The only thing legislators hate more than cutting budgets is imposing taxes, the other option for getting the state’s fiscal house in order.

Whether Alaska government can do either or simply kicks the can again remains to be seen.

The fiscal plan warns that a crisis near, arguing that “now, the CBRF balance is at what many consider to be the minimum level needed for cash management and emergencies, and it appears unlikely that high oil prices are going to save the day.”

Be that as it may, there are political reasons for years of political inaction even if the results were not good.

“…The data clearly show that spending $16 billion out of savings over the last four years to support higher government spending did not get Alaska out of a recession and did not significantly reduce unemployment,” the plan says.

Fiscally, that’s a valid argument for changing course. Economically, some are already arguing the Dunleavy plan could make things worse, lengthening the recession and increasing unemployment. Politically, lawmakers are mainly thinking about what plan will get them re-elected.

Stay tuned.

 

 

 

 

 

 

 

 

 

 

 

 

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50 replies »

  1. Oh, also I do not understand the continuing shots at Rogoff. Did your idea for this essay start with her and then, out of laziness, need something else to conflate with her? Or did you start at the end and work up to that? Medred, everyone knows by now about that raging hardon you have about the ADN matter. I suppose ten years from now we’ll STILL be hearing about it.

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  2. ctrl+f (income tax) and there are at this time exactly four hits, three of them from one poster. That pretty much says it all.

    I’m pretty content what with I have these days as a relative AK newcomer. The kids are launched and debt free mostly because of the PF and 529. I can live with gravel roads again. What I can’t wrap my brain around is this atavistic attitude of NO NEW (but income tax would be actually old} TAXES UNTIL EVERYONE DIES!

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  3. We have had an economy hyper-inflated by the Dividend for 38 years. Weaning ourselves from this Government Crack is very difficult.
    The budget can be balanced and still pay out a $1000 Dividend this year which I believe is the Legislature’s goal. My recommendation following that is to reform the Dividend benefit to an Individual Trust Account invested and managed by the APFC.

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    • I agree with something like your initial statement chris but don’t see legislature giving up on their ability to appropriate those PF earnings.

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      • You misunderstand. The annual vestment to each person’s individual trust account would rely on an annual appropriation from the Legislature. The size of the annual vestment would rely on their ability to maintain against cost growth in government services. Each person’s account would grow in value due to APFC management and by annual vestment. The longer you live here the bigger you account grows. This would reward longevity in a forward looking way.

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      • OK chris, if I understand your proposal you feel that folks would choose to invest, rather than take it in ATVs or outboards. What makes you think that those demanding full PFDs now would back such a proposal? I could see those not needing their PFDs going for it, though.
        I could get behind such a program but I also don’t depend on a PFD. What is in your program for folks wanting new snow machines regularly?

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      • My economic assumptions are based on a 5.25% “statutory” draw on the PF. If I had the power I would also pay off the oil tax credits (at a discount) and re-fund the CBR with a beginning $1 Billion from the PFER. This will drag down our Dividend potential but it is exactly what we deserve.

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      • Bill, my objective is to right the ship without worrying if my crew is well-fed. My plan is actually a soft landing which will create more long term stability in our economy and our elections.
        Oil tax reform must wait until we have our own house in order.

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      • I hear you chris but the crux of the argument right now is what is to be done for those folks seemingly promised their full statutory PFD (along with past payments confiscated for govt.). I know they bought into Dunleavy’s bullchit and probably don’t deserve a damned thing but Walker went out onto a limb by taking that PFD money and we owe him much for it IMO. That said it cost him an election and the issue needs to be settled, somehow.
        We’ll see how many folks are still barking up that PFD tree after they’ve seen the school bonding debt they’ll have to pay and the other cuts they’ll have to pay for to keep from living like cavemen. Verdict is still out till all those still demanding PFDs are counted.

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      • I have to agree with you on the Dunleavy budget proposal. It was extreme. However it did encourage the conversation we are having now. The Big Dividend philosophy will die of its own accord. It is unsupported by law and the Alaska Supreme Court I would surely bet.

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      • I should clarify the the Individual Trust Account will have restrictions on the use of the funds in order to meet tax exempt/deferred status. Nonetheless, each resident each year will receive a vestment and earnings growth – just like the Permanent Fund!

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      • Bill,

        The reasons Walker was not re-elected had nothing to do with Dunleavy. I would put the reasons he wasn’t re-elected in the following order.

        1. He withdrew his candidacy.
        2. His Lt. Gov had a sex scandal with and underage girl, eventually leading to him withdrawing his candidacy.
        3. He was a horrible Governor.
        4. He was a single issue Governor, and that single issue is not currently financially feasible.
        5. That single issues drove him to seize money from every Alaskan woman, child, and man with no purpose in mind for using that money.
        6. He did not live up to his campaign promise of cutting the budget.
        7. He was a horrible Governor.

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      • Steve-O, Walker was saddled with Marky-Mark to split the ticket but his issue with taking a portion of PFDs was pretty front and center with a lot of folks. It was always assumed that anyone who attempted to take the PFD was destined to lose and Walker defied that wisdom. Dunleavy ran on giving back those PFDs and that free money got him elected IMO.
        That said, those with half a brain have figured out that what’s the point of getting that big PFD if they have to pay it to local govt. to pay for school bonded indebtedness, among other things. The jig is up for Dunleavy and his proposed budget IMO. We’ll see, of course, but I don’t expect to see any push for those PFDs now that his economist is as out to lunch as his budget director.

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  4. Here is Dunleavy’s economist (Ed King) speaking of proposed budget: “Some people that feel those reductions more severely won’t be completely offset by the dividend payment, but when you look at the total state in aggregate, the positive effects of the permanent fund dividend being increased outweigh the negative effects of the government spending decreases,”
    Now if anyone has been paying attention here, this is the same Ed King who asked Senate Finance Committee if he could be excused from answering their question about his feeling about Medicaid cuts because he is now wearing an administration hat. Also, the ISER folks (from Gunnar Knapp on to his replacement) don’t buy King’s argument, either. And the House Finance folks haven’t bought King’s BS, either.

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  5. What a dog and pony show this budget debauchery has turned into…
    Want a balanced budget Alaskans?
    Cut the ENTIRE budget by 10 percent.
    An across the board cut in salaries, oil taxes, pensions and “pet projects” would save the state around 1.3 Billion dollars…
    Colleges and state ferries would remain “open for business” as well as Medicare expansion and public safety funding.
    Any attempt at “surgical” reductions only leaves us with one sided arguments to follow….
    This is not fair to residents, business owners, teachers, state employees or retired pension folks (many of whom have left the state and no longer pay property taxes or collect a state PFD).
    Without addressing the elephant in the budget which is the Tier 1 pension system and the oil producers giant tax incentives this lingering debate will just fall back to “cut the PFD or tax more”…

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    • You are assuming Alaskans want a balanced budget, Steve. And if you were in such a situation personally would you go for such a reduction in your own budget? Of course not!

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      • Bill,
        Our Governor ran on the “balanced budget” platform…
        That is their whole defense, yet they (the politicians) make NO reference to cutting their state pensions or over priced salaries.
        Instead we are asked to go testify for our PFD?
        The large ($6,700) PFD was also on the Governor’s platform for election…
        Aside from a few democrats in the house, NO mention of cutting the Billion or so in Tax Credits to big oil subsidiaries who reap in this “gravy”…
        Why are Medicaid and Schools on the chopping block while Billion dollar companies get hand outs and our PFD is made to take the hit?
        “Corporate Totalitarianism” is what some may say.
        That is why the Koch Industries (Americans For Prosperity) have set the parameters for the “town hall” debates….and one of them is that they get to record you, but you cannot record what they say? Is this legal in a “public” forum?
        Chris Hedges (Pulitzer Prize winning “war” journalist) who has followed the spread of Authoritarianism throughout Europe and Latin America has said “Once rights become privileges, then freedom is lost”

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      • Steve, you speak of cutting salaries and pensions as if it’s possible. With a $70 billion PF and Alaska’s judges all on the PERS system what do you think are the chances of cutting their retirements?
        You are only being asked to testify for your PFD by the Dunleavy crowd, as everyone else is already at it objecting to these cuts IMO.

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      • Bill,
        I do not have the silver bullet for the pension crisis throughout America, but I know it should be included in the current budget discussion.
        Some states are moving the costs on to municipal budgets where teachers, etc work.
        “There is no one-size-fits-all solution to the pension funding shortfall and the budgetary challenges facing individual states, but without new policies that commit states to fully funding retirement systems, the impact on other essential services—and the potential for unpaid pension promises—will increase. 
        In 2016, the state pension funds in this study cumulatively reported a $1.4 trillion deficit—representing a $295 billion jump from 2015 and the 15th annual increase in pension debt since 2000.”
        As for that 70 billion PF…
        Well, at one point I thought that was Alaska’s money…but after looking at the investment portfolio, I now know that is not really the case.

        https://www.google.com/amp/www.pewtrusts.org/en/research-and-analysis/issue-briefs/2018/04/the-state-pension-funding-gap-2016%3famp=1

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      • Steve, the funding shortfall for Alaska’s PERS is a complete other story-one that involves Legislative funding it as they see fit. That, by the way was the result of Senator Dan Sullivan opting for letting defendant off the hook for the shortfall in that lawsuit.
        You mentioned reducing salaries and pensions as if it were possible and I pointed out where it is just not reasonable (though possible). This situation has nothing to do with other State’s wrestling with Private Sector companies wanting to get out of their pension systems, although I wouldn’t be surprised if Arduin were not on board with such. Heheh! Remember here that Dunleavy’s folks are getting those salaries now and I just don’t see them barking for their reduction (even if they could). Govt. unions would fight any attempt at reducing salaries, of course.

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      • How does cutting your revenues (oil taxes) while cutting your expenditures lead to a balanced budget.
        Also, what’s the line item on Tier I retirement benefits?

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      • Aksound, the retirement benefits are funded by their own contributions and earnings on them. The shortfall mentioned is due to the company running the earnings at the time (don’t remember the name) made a blunder and did not collect enough contributions because of that blunder. They were sued and Senator Dan gave them a deal they couldn’t refuse.
        Anyway, to answer your question the funding of tier 1 retirement folks is not a budget item that could be line itemed. Should the Legislature decide to fund some more of that shortfall that item could be vetoed, however.

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    • Pay everyone a final PFD of $25,000. At a 5% PMOV we’d start with $2.25-2.5 bn/yr. for the budget. Slug it out over the shortfall. If its taxes, cuts or a combo – so be it.

      Stop the worst public policy ever invented. Change the constitution to prohibit a dividend. Allocate a third to a half of PF for co-investment in AK projects because the returns are generally better than the PF’s. No inferior positions. Leverage permitting to give a preference to SOA participation.

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      • Impossible without a vote of the people ($25k payout) and I doubt Legislature would go for a vote. You are dreaming when saying AK projects return better than PFs. Do you have any idea of how many AK projects have gone under? We wouldn’t have a PF now if AK projects were permitted to begin with IMO.

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      • Exactly My point Mr. Yankee, thank you.
        I’d also add that incentivizing people on PERS/TRS to stay in Alaska has some great economics going for it. We’re a buffer when industry cuts back. Our spending doesn’t fluctuate so much, and we’re not taking away good jobs from anyone, generally.
        An enormous jump in potential property taxes (through the state pulling money to the state) or dramatic unpredictable jumps in options like the Pioneer Homes make it harder and less likely for that money to stay in Ak.

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      • I agree aksound but will mention a conversation I had with a young Juneauite who thought that us retirees should move South to drop the housing market so he could afford a house in Juneau. It takes all kinds, of course, but to cause a drop in housing market (for such a reason) just doesn’t make sense to anyone owning a home IMO.
        For that reason, I suspect this legislature to object to Dunleavy proposed budget as, by it’s design, would prolong our recession and these legislators would be, in a sense, cutting their own throat.

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  6. Ive been anticipating this juncture for 4 years, surprised we made it this long without a radical change to state finance.Regardless of outcomes and beliefs, for those not following along at home as they should have been:
    Its pretty late in the game to have a “come to jesus moment”, but consider rapidly deleveraging your personal balance sheets, cash is king (CD’s/savings,short term bond funds).
    Things for several reasons are going to get a whole lot more expensive here.
    We’ve been living in a dream for most of 40yrs.

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    • The one dreaming here is you Dave-I suspect that housing is going to be less expensive in most areas.
      Of course, the inverted yield curve has some thinking US recession but that’s another story.

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      • Bill,
        Those lower housing prices you speak of will be do to the falling property and home prices that we have been seeing for years in many places across Alaska.
        An older friend once told me that back in the 80’s guys were lined up outside of Wasilla with everything they owned on a trailer with a sign out front “For Sale”…
        They left their keys with a realtor and headed down the Al Can…
        If things continue down the path we are on, I guess “Realtor” would be a good job to have.

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      • That is correct Steve, and I never heard of a single bank attempting to go after those delinquent homeowners (banks just ate those losses). Not like anyone faulted homeowners but still banks are not in the business of taking losses. Old friend in Los Anchorage gave his house keys back to the bank and moved back to Oregon with his same airline co. and nobody ever lost any sleep over it. I believe that one of the reasons against the Dunleavy proposed cuts is that these legislators mostly own homes and they aren’t keen on losing their equity in them.
        Just like Dave above, I have a friend in Juneau who has been hoping for a severe enough recession that she can purchase (steal) a home in Juneau-didn’t work out for her in the 80s and probably won’t work this time either. Heheh!

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      • Bill,not sure what your smoking,but theres nothing inferred by my posts with regards to buying, or hoping for a(deepening)recession.
        But one could, because Optionality is just that, one could sit tight, one could buy, one could move part time to a state with better than 60+% funded state pension liability.
        Or one could just close up shop and sell everything for a better economically stable place.
        No matter how you look at it,barring Arabia/Russia running out of oil, things are going to get expensive here.

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      • Well Dave, I suppose one could think that hoping for the loss of 50k population doesn’t mean a thing like hoping for a recession but they wouldn’t be thinking clearly. That would amount to smoking some crazy chit.

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  7. In 2005 I had it made. I’d managed to get the State’s labor relations function re-established as an independent division rather than a part of the Division of Personnel, I was the Director, and I had developed a functional staff after the diaspora of all the experienced staff in the Knowles Administration. The price of oil had ticked up a bit so we weren’t looking at budget cuts or CBR fights and I’d had a little money to put on the table for the first time since the early Nineties, so I had all the unions quietly under contract until June 30, 2007. I was Tier 1 PERS and over 55, so I didn’t have to do anything I didn’t want to do just to keep a job. I spent as much time on my boat as I could and let my staff run the place and learn how to be my successor.

    Fast forward to the Spring of 2006 and it was evident Gov. Murkowski wasn’t going to be re-elected, I couldn’t stand the people in my Commissioner’s Office, I had my 120 days in to get a year’s service credit and the only way I was going to get another 120 days was to learn to get along with Sarah Palin or endure life under Democrats again should Knowles win. I decided July 1, 2006, was a good day to become a former State employee.

    State government is no bigger today than it was then; in some areas it is smaller, but State employees make half again as much as they did then and the State spends far, far more on DHSS programs and Education, plus we’ve built a new large prison and brought all of our inmates back to Alaska at greatly increased expense. The DHSS General Fund Operating Budget is as much as the entire State’s GF Operating Budget was in the Nineties, and most of that spending increase is in program funding, not personal services costs.

    One of the State’s dirty little secrets is that it needs an over 3% increment in its personal services budget just to maintain the status quo because of step progression in most of the salary schedules. Once the price of oil tumbled neither Parnell nor Walker did anything to stop the automatic wage increases and so far neither has Dunleavy. Nobody is talking about it yet, but the Executive Branch needs about a $300 Million increment in personal services just to pay for the sweetheart contracts Walker gave some of the unions after his loss and for the Correctional Officers interest arbitration award. The State completely avoidably went to interest arbitration with the COs and predictably got its head handed to it. There are only very limited options in dealing with this; the Legislature has approval authority of some sort, but the ’99 amendment to PERA regarding approval of a contract has not been tested in court and to my mind it is incomprehensible, so there’s a two or three year slog to the Supreme Court. Or, the Legislature can approve it and fund it, which means there went $300 Million or so from potential Dividends so State employees could get raises. Or, the Legislature can actively or passively approve it but provide no additional funding, which means about $300 Million in State employees salaries comes out of the economy because of layoffs.

    Before this becomes a book, unless Alaska again gets saved by war in the Middle East, somebody is going to have to take a haircut. Not giving the unions what they want means a war with them and likely a complete shutdown of State government on July 1st. I don’t think that either the Administration or the people of Alaska are prepared for that, but they may stumble into it. One way to take the haircut is to make living on welfare in Alaska a lot less lucrative. The Legislature won’t pass any cuts, but the Governor can make some by line item veto, however, he has no assurance that even his own party will support him in the inevitable attempt to over-ride his veto. To solve these problems Gov. Dunleavy has to decide if one term as Governor may end his political career, and some legislators have to decide if this is their last term in the Legislature. Nobody is going to take a haircut without a fight.

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    • Haa Haa,guess what mill rates are going to do Bill.The incorporated areas, which is the vast majority of the peeps will be shouldering more and more of what was assumed state load.
      I have several lots in Homer area that Ive had since the ’90s,assessments have been fairly stagnant for years, with a mild upward slant.Suddenly in ’16 it shot up 30%.
      New market realities?,perhaps, they do have million $ views, or perhaps it had something to do with the State shutting off the taps for Community revenue sharing.
      My primary residence here in the Matsu,while the assessment has been fairly consistent, the mill rates ratchet up more and more.Up approx ~10% in the same time frame.
      I have been expecting my cost of living,(that is the taxes payed, not prices paid) to reach a total of 25% increase, so I expect another 15% coming(sales/income/property/user fee).
      Its quite possible that my projection is way to low.
      I won’t leave because taxes rise,Ive been preparing for this for 4 years, and look forward to 50,000 people leaving(I think we are somewheres about 12-15k so far)
      I wasn’t implying a depression or there abouts,by the way.Besides being prudent,deleveraging and being cash rich leaves one with optionality.

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      • You know Dave, I’ve often wondered just whom it is that looks forward to recessions-thanks for pointing out how it can be lucrative for some. A rising economy raises all boats but a shrinking one has some issues. Good luck to you.

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  8. The miracle that the Dunleavy folks were hoping for was higher oil prices, according to Art Chance before he was so rudely asked to leave. Then the budget proposal was introduced and it fell flat, getting such remarks as this from Senator Micciche-“We have a choice of whether/not we want to live like cavemen.” And we had, by most prognosticators, a chance to pull ourselves out of this oil-price related recession early this year-Dunleavy proposed budget guarantees we stay and very likely enter a depression (although the ISER guy suggested that was too harsh a word).
    Just my opinion, but there is no way this legislature will act to prolong our recession. The number of folks (like Mongo) who are willing to crash our fragile economy to collect a fatter PFD are too few to re-elect any but the likes of Lora Reinbold and, in fact, her constituents may choose to not live like cavemen. I’m unsure of Eagle River’s school bonding debt, but those are the real numbers bothering everyone IMO.

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    • Well, more oil revenue anyway from increased production. Also, some think that they can use pressure on unions based on the Janus decision to bring them to heel, but I believe that is a forlorn hope. Most State employees have little loyalty to their unions, but they have a lot of loyalty to keeping their jobs and if supporting the union is the way to keep their jobs, they’ll support the union. The reality is that most of the things that State employees do are only done by the State. That job that is worth $60K, $80K, or even $100K or more in State government doesn’t exist in the private sector and if you lose it, you can’t make your mortgage payment wearing a blue vest. The U-Haul place is your next stop.

      The only governor I worked for who had the guts to cut or eliminate a major program was Frank Murkowski, and cutting the Longevity Bonus program probably did as much as appointing Lisa or buying the jet to make him a one-term governor. An objective observer would say that it would be better to make cuts that would send some of Alaska’s welfare dependents packing than to make cuts that will send formerly well-paid public employees packing. We could also save a lot of money by giving up Jay Hammond’s pleasant fiction of local control of State funded education and do away with most of the school districts and put them all under State control. The State ain’t no prize of efficiency and efficacy, but it beats Hell out of providing sinecures for $100K+ superintendents who are nothing more than State funded tourists.

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      • A local Juneau contractor, to the right of Attila the Hun, recently proposed a personal income tax where each Alaskan could credit their PFD against their tax liability. And, you guessed it, this would result in a negative income tax for those with little income. Additionally, the only way such a tax could help General Fund is for the rate to be high enough to offset all of those PFD credits, making it a fairly high rate (say % of Fed Income tax rate).
        Anyway, such a tax would limit Alaskan Residents tax liability and yet collectively get non-residents to pay some sort of fair share. I see no reason to not look at such a tax to keep us from prolonging this recession.
        And Art, I know many were disappointed that you couldn’t have been kept on Dunleavy’s team as they were hoping the huge government job losses could be kept to just the Leftys. Oh what a tangled web we weave……

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    • The economy is not driven by government, which produces nothing marketable. The reason the economy is bad is because of the price of oil and a population hostile to more production. Whats killing the economy is a population who continuously want more while biting the hand that feeds them. Eventually you run out of other peoples money when they go Galt.

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      • Well Mongo, I’ll agree that Oil cos. have gotten tired of funding the whole shebang in Alaska. You call it going Galt but they are just wanting more of those profits-age old situations and it’s paid off for them, so far. It’s some stretch to call it their money IMO.

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      • Who gets the commodity to market 1000s of miles away while taking all the risk and maintaining an aging infrastructure? Who arm chair quarterbacks while whining its their oil and thus their money?

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      • Mongo, it’s only their money if they can keep it and as I said they’ve been fairly successful so far. Sarah got her ACES passed and it lasted for some time until a couple of bought Senators were able to repeal it with Parnell’s help. Some attempted to get that bill fixed for low oil prices but were not successful. Doesn’t mean that can’t be revisited, of course.

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  9. Either way at least 300,000 people need to leave the state in the coming decade or so. With declining oil production and a population hostile to new oil production or mining or just about anything except bigger government………………well if you own a home you might want to think about selling while you can.

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