LOS ANGELES - A new
The state is on track to exhaust its once vast budget reserve within two years, the governor said, and lawmakers haven't proposed a serious plan to replace the revenue that once came from oil.
Walker's six-page report details two options on the table for the legislature as it debates what to do about a fiscal reality in which low oil prices have slashed the state's revenues and earned it downgrades from all three major rating agencies.
One is a "no action plan," while the other is a partial fix.
Walker is promoting a third option, his own New Sustainable
"I thank the 29th legislature for convening its fifth special legislative session to consider a truly historic Alaskan challenge," Walker said in releasing the report. "I have said many times: our new fiscal reality only constitutes a 'crisis' if we fail to act. Unfortunately, after a regular, extended, and special legislative session this year, 90% of our fiscal problem remains – with little optimism for reasonable compromise. It's clear now: We have a serious fiscal crisis. How we deal with this crisis will define us all – with no less than Alaska's future hanging in the balance. I therefore expect, and all Alaskans should demand, compromise and affirmative action by this legislature on a comprehensive solution to our massive budget deficit during this special legislative session."
Under the no-action plan, the state would require about $1.5 billion of revenue, the report says, and the CBR will be completely depleted in fiscal year 2018.
After that, Alaska's current revenue structure would produce approximately $1.5 billion in unrestricted general funds assuming the $55-per-barrel oil price. In that situation, the report says, the budget would be one-third of the current fiscal year 2017 budget and only one-quarter of the fiscal year 2015 budget.
Most government agency operating budgets would be 10% to 20% of current levels, a level similar to state spending in the late 1960s. School funding would be reduced to 32% of the current $1.25 billion, and state funding used to assist local governments would cease, shifting those costs to municipalities.
If the legislature passes Senate Bill 128, previously passed by the Senate, the report shows an outlook that is brighter but still ugly.
That legislation, the Permanent Fund Protection Act, would shuffle some of the oil money around and cap the state's annual dividend payout to its citizens. It is one aspect of Walker's larger fiscal reform plan.
Under the SB 128 scenario, according to the report, Alaska would be working with a future budget of around $3.4 billion. While that would be a noticeable change from the no action plan, it would still involve sharp cuts to public spending, including a sharp drop in transportation funding and an $80 million reduction in university funding.
Rating agency analysts have said Alaska needs to take decisive action to avoid the likelihood of further downgrades.
Alaska began the year with triple-A ratings across the board but the three largest rating agencies have all dropped the state to the AA-plus level.
In addition to leveraging Alaska's $50 billion permanent fund, Walker's plan would impose a new income tax and new or increased taxes on mining, fishing, tourism, fuel, alcohol, and tobacco.
Walker's statement included a not-so-veiled threat he will work to see that a failure to adopt the reforms he supports will come back to haunt legislators at the ballot box. Alaska's legislature is Republican-controlled, while Walker is officially an independent.
"One way or another, one of these three plans will go into effect when the legislature gavels out of the fifth special session," Walker said. "I will ask every legislator and every candidate for the legislature to choose which of these three plans they support," Walker said. "Failure to choose a plan will constitute support for the no action plan. After Alaskans become familiar with the type of Alaska each of these three plans represents, voters will be much better informed about who should represent them in Juneau."
