OPINION: Dunleavy passes budget ball to Legislature

  • Alaska Gov. Mike Dunleavy, right, is seen in Fairbanks on Sept. 24 alongside Chief of Staff Ben Stevens. (Photo/Austin McDaniel/Office of the Governor)

After proposing a budget this past February that showed what Alaska can afford while paying out a statutorily-calculated Permanent Fund dividend, Gov. Mike Dunleavy’s second try reflects what many Alaskans say they want.

At 6-foot-7, Dunleavy towers over the size of traditional point guards, but after a major shakeup of his team from the top down following a tumultuous first season he is now passing the ball on the budget to the Legislature that fought him tooth-and-nail over his initial plan to either cut or veto hundreds of millions in spending.

The budget Dunleavy unveiled on Dec. 11 is essentially flat at the bottom line while absorbing an estimated $100 million-plus in formulaic increases to Medicaid and K-12 education, according to his staff.

This time around, the governor is not proposing massive cuts to close the gap between paying the statutory PFD and the revenue from oil taxes and Permanent Fund earnings; rather he is sending the Legislature a budget that uses about three-quarters of the dwindling savings of the Constitutional Budget Reserve.

In addition, the governor is proposing a supplemental budget to be drawn from the Earnings Reserve that includes an $815 million appropriation to fully pay the PFD for 2019, which was set at $1,606 by the Legislature and ultimately accepted by the governor who campaigned on following the formula in law as well as making Alaskans whole after three years of essentially arbitrary amounts chosen by his predecessor through a veto and then lawmakers through their budgeting process.

The supplemental budget, which also includes additional spending for Medicaid, firefighting costs, the Alaska Psychiatric Institute and Pioneer Homes, would exceed the annual 5.25 percent cap on withdrawals from the Earnings Reserve established under Senate Bill 26 that passed in 2018. The CBR would also be emptied nearly entirely.

While Dunleavy’s choice for the coming year to propose a budget funded from savings accounts rather than balanced through drastic cuts is 180 degrees away from his approach over the past year, the message to the public and the Legislature remains the same: current spending is unsustainable and lawmakers must finally reconcile the conflicts between SB 26 and the PFD formula that remains on the books.

Also like last year, Dunleavy knows that his budget as presented will change dramatically once the Legislature is finished, whenever that may be although everyone hopes it will not drag into August once again. What is different, though, is that all the oxygen will not be sucked out of the debate over deep cuts the public and their representatives have been clear they refuse to accept.

This budget should allow legislators to start the session working to resolve the PFD formula and on a spending cap that the leaders of both the House and Senate have said they support in principle.

House Speaker Bryce Edgmon went as far as to say to the Alaska Chamber in October that he believes a spending cap must be placed in the constitution because the Legislature has demonstrated repeatedly over the past several years that it will ignore laws it determines to be inconvenient whether it be the statutory dividend formula or where a governor may call a special session.

Such an admission can only be taken as a win for Dunleavy, who made a spending cap one of several constitutional amendments he proposed along with his first budget.

Alaskans may be willing to accept a change to the dividend formula in exchange for the services the state provides, but it is difficult to imagine a scenario where the public will simply allow spending growth to erode the PFD’s share of the annual appropriation from the Earnings Reserve.

The Legislature no doubt bought itself some time this past year by settling on a PFD of $1,606 that largely satisfied Alaskans (and also drained the Statutory Budget Reserve), but without their budget cuts and the governor’s vetoes the dividend could have been as little as $600.

By putting the focus on spending rather than slashing, Dunleavy has given the Legislature room to work on solutions from the outset of the session.

Lawmakers have the ball now, but Dunleavy will only get credit for an assist if they can hit the shot.

Andrew Jensen can be reached at [email protected].

Updated: 
12/11/2019 - 2:03pm