Some Alaska lawmakers differ with Gov. Mike Dunleavy about how to tackle the state's $5.5 billion deficit.
Three speakers — all Republicans, like the governor — parted ways with Dunleavy's budget proposal in many instances during Thursday night's online public policy forum put on by Commonwealth North, a nonpartisan, nonprofit public policy forum.
Senate Majority Leader Cathy Giessel and Sen. James Kaufman shared their ideas about how to manage the state's budget, the use of the Permanent Fund Dividend, and the urgency of capital investment.
The two are Republican members of the Senate majority, which is a coalition of Democrats and Republicans.
The Alaska Permanent Fund was created in 1976 to help save some of the state's oil revenue bounty for future generations. It funds an annual payout to Alaska citizens, but has become an increasing crutch for funding the state government.
The increasing reliance on those earnings, with 43.7% of state funding coming from an annual transfer from the fund, versus the dwindling percentage of petroleum tax revenue, now 7.9%, makes this topic more acute, according to Giessel.
The state's inability to backfill the federal cuts to Medicaid, food stamps, behavioral health and housing programs makes finding solutions more critical this year. The state is as reliant on federal funding for social programs as it is on oil revenue, Giessel said.
Dunleavy's
Giessel highlighted the cost of the governor's dividend payout proposal — contributing to a $1.68 billion gap — and suggested a serious discussion is needed on the dividend's role.
Giessel suggested it might be time to eliminate the dividend entirely. Lawmakers have routinely carved down the amount Dunleavy suggests for the dividend.
Kaufman focused on the need for systemic fiscal reform, advocating for a constitutional spending cap and better four-year strategic planning, while stating he would only consider new taxes, such as an oil company tax equalization bill, if fiscal protections were implemented first.
He criticized Dunleavy for presenting lawmakers with a budget with a $5.5 billion deficit saying doing so puts lawmakers in the situation of spending the entire session finding ways to carve programs, rather than focusing on needed solutions. He added that this is not the first time the governor has proposed a deficit-spending budget.
Giessel argued that money from the Permanent Fund should instead prioritize capital investment, infrastructure, and fully backfilling federal cuts to essential social programs like Medicaid and SNAP.
Natasha Von Imhof, a former state senator, echoed that sentiment, arguing the state has a "priority crisis, not a fiscal crisis."
She criticized the collective agenda of the last six years for spending "billions on the cash payout, rather than spending on capital improvements or roads."
Von Imhof suggested informing citizens of the opportunity cost of allocating funds to the Permanent Fund Dividend instead of infrastructure. She also cited social media discussions among Anchorage millennials and Gen Z who prioritized economic opportunities over receiving an annual dividend check. Her recommendation is to balance PFD allocation with capital investment, prioritize infrastructure and deferred maintenance, and fully allocate the Department of Transportation federal match.
Von Imhof noted that Alaska is second to last among all states for economic growth. She warned that the critical working-age population is declining, while the 65-and-over demographic is growing, as the workforce seeks opportunities outside of Alaska.
Kaufman stressed the need for better four-year strategic planning so that budgets reflect a clear roadmap, assuring citizens that tax revenues are not "going down a rathole."
The issue of the Constitutional Budget Reserve also emerged, with Giessel noting it is shrinking.
The governor's supplemental request this year requires $425 million to backfill expenses, which must come from the reserve fund, pushing the reserve below the $3 billion mark. This reserve fund is meant for emergencies and cash flow, she said.
