Category Archives: Posts by Alaskans for Sustainable Budgets

This morning I spoke to the regular, every-other Thursday breakfast meeting of the Alaska Support Industry Alliance on A Way Forward on the Alaska Budget.  The speech comes on the cusp of a dramatic next few weeks in the Legislature, as they come to grips with final state spending levels and grapple with how they are going to pay for them.  The speech summarizes my views on how those issues should be resolved.

Yesterday, Scott Goldsmith and I testified before the Senate State Affairs Committee on SB 128 (the Governor’s fiscal bill) and SB 114 (Senator McGuire’s fiscal bill, which GCI has been using in its presentations).  The video of the hearing is here.   Scott’s testimony starts at 17:05:00 into the video, mine at 1:10:00.

Both of us testified using the Goldsmith sustainable revenue model, and both of us concluded, though for different reasons, that the Legislature should not enact PFD cuts or broad based taxes this year.  Scott believes that such revenue measures may be needed in future years; based on the outlook I believe is appropriate to the state’s current fiscal situation I am not as certain.  The slide decks follow:

Based on my outlook (at slide 10) I conclude that the current sustainable revenue number is $4.3 billion (compared with a current, FY 2016 budget of $5.4 billion).  As I outlined in the testimony (at slide 11) I believe that spending can be reduced to or near this level with the effect of avoiding PFD cuts or taxes.

In his testimony Scott compares different approaches to deriving a number, using various inputs and timeframes (at slide 15).  Using a 3-year moving average, which is designed to smooth out what otherwise might be year-to-year jumps due to changing oil values, he concludes that the current sustainable revenue number is $4.39 billion.

Separately during my testimony I expressed significant concerns about the effects of cutting the PFD on Alaskans and Alaska’s private economy (at slides 16-18).  Scott did as well (at slide 18).

In its coverage of the hearing (“For lawmakers, 3 options to tap Fund earnings“) the Juneau Empire listed the approach as a third option before the Legislature this session (in addition to the Governor’s and Sen. McGuire’s proposals).  Alaska Dispatch News columnist Dermot Cole had his own take on the hearing, and another view from Alaska Commons — which confuses some of the testimony to create a conflict between Scott’s testimony and mine similar to what Dermot initially did in writing his column (until “Goldsmith and Keithley told me they do not believe there is a contradiction …”) — is available here.

To some degree the morning hearing was an opener for a subsequent hearing later in the day to take broader public testimony on the Governor’s proposed approach.  As several of the state’s media outlets reported, there was significant opposition to cutting the PFD during that hearing .  (Alaska Dispatch News:  “Governor’s budget plan picked apart as Alaskans debate Permanent Fund changes;” Fairbanks News-Miner, “Public testimony opens for new PFD plan;”  KTUU, “Alaskans weigh in on proposal to finance government with Permanent Fund earnings;” KTVA, “‘Don’t touch my PFD’ Public weighs in on Governor’s PFD proposal“).  In part the later hearing provided real life examples of the concerns Scott and I raised in the morning about the adverse effects on Alaskans and the private economy from cutting the PFD.

It will be interesting to see where this goes. I anticipate it won’t be the last time this session we have the discussion.

Speaking on behalf of Alaskans for Sustainable Budgets and following on the heels of Governor Walker’s State of the State last night, I had the privilege of being the luncheon speaker at today’s Friday Fairbanks GOP Lunch to discuss the Alaska state budget.  As with a previous presentation last month to the Alaska Republican Assembly, the speech centered around three points:

• Alaska is facing a budget challenge but it may not be as bad as some suggest.
• In my view, there is a solid and realistic fiscal alternative to addressing the state’s current budget issues that doesn’t rely on PFD cuts or taxes.
• The Governor’s and GCI’s (“Alaska’s Future“) PFD cut and other tax proposals are unnecessary, are imbalanced (between the private and government sectors) and may do more harm than good to the overall Alaska economy.

A copy of the slide deck is available in the window above or here.

As I have before, Tuesday evening I presented to a meeting of the Alaska Republican Assembly on Alaska’s current fiscal situation.   The slide deck is above.

The presentation covered my views on what the current outlook is for Alaska’s fiscal situation if we continue down the road of “business as usual,” an analysis of the alternatives that have been proposed for changing course and my thoughts on the best way forward.

My conclusions?

• Alaska is not “falling of the cliff” immediately, but the 10-year outlook demonstrates we can’t continue “Business as Usual”
• “Cuts only” based on traditional revenue sources fall well below FY 2006 adjusted (pre-bubble) spending levels, send Alaska back to pre-oil spending levels
• Based on current, long-term fiscal outlook, “Sovereign Wealth Fund” and SB 114 both go unnecessarily far by cutting PFD and taxes
• Based on current, long-term fiscal outlook, Goldsmith model remains best current approach (properly monitored and adjusted)
• The Legislature needs to respond to S&P this session

As most readers likely are already aware, tomorrow (Saturday, September 19, 2015) Alaska Common Ground and the University of Alaska – Anchorage Institute of Social and Economic Research (“ISER”) are sponsoring a day long forum on Alaska’s fiscal and economic future.  A description of the forum and detailed agenda is available here.

The forum is from 9am – 4pm, at the Wendy Williamson Auditorium located on UAA’s campus.  For those unable to attend in person, the forum will also be televised live on 360 North, the same public television system that televises Gavel-to-Gavel.

Based on the agenda and discussions with both those who have brought it together and various speakers, I anticipiate it will be a significant event in shaping the course of the coming debate on Alaska’s fiscal future.

One part of the forum will involve presentations by four Alaskans, each of whom will discuss and defend their own budget proposals, with audience members voting after the presentations on which they favor.  Those presenting are John Havelock, former Alaska attorney general; Liz Medicine Crow, president/CEO, First Alaskans Institute; Gary Wilken, former Alaska state senator … and me.

Those interrogating the panelists about their proposals (I am confident in a good sense of the word — hahahaha) are  Cliff Groh, Chair of Alaska Common Ground; Gunnar Knapp, ISER director and professor of economics; David Teal, director, Alaska Legislative Finance Division; and Larry Persily, former federal coordinator of the Alaska Natural Gas Pipeline Project, and former deputy commissioner, Alaska Department of Revenue.

Somewhere along the way I can guarantee I will mumble to myself (because I always do), “why did I agree to do this?” … and somewhere later along the way I will realize the answer.

Each of the “citizen panelists” has been asked to provide materials explaining and supporting the position.  These will both be handed out to those attending in person and available online for those tuning in via web or television.  For any that want to have a flavor for what is likely to be discussed — or get a jump in formulating questions, my set follows.

We will see how this goes ………