Alaskans weigh in on what’s important, how to pay for it

FAIRBANKS — State services like the pioneers’ homes, the aerospace corporation and the agriculture division are among Alaska’s least important, according to participants in a budget conference held by Gov. Bill Walker.

Those were the only three services identified as low priority Saturday during the three-day conference at the University of Alaska Fairbanks, reported The Fairbanks Daily News-Miner.

Participants in the “Building a Sustainable Future” event were asked to rank operations as critical, medium or low priority and review their current funding levels. Nearly every service was considered critical.

“That really tells you hard this is going to be,” said Department of Revenue Commissioner Randy Hoffbeck. “People value the services government delivers and they’ve been delivered at very little cost.”

He said the exercise generated $20 million worth of cuts.

Conversation turned instead to how the state can continue funding the operations after oil prices plummeted.

Just about every service of the Department of Health and Social Services was ranked as critical, aside from the Alaska Pioneers’ Homes, which participants said should serve more people.

“We’re one of the wealthiest states in the nation and what we might consider to be democratically desirable may not be politically possible,” said resident Bill Hall.

“But it’s only not politically possible if we aren’t willing to step up and say we’re willing to pay for something,” he continued. “We’ve been getting a free ride, all of us here in this table, for a long time. We’re capable of paying for a lot more.”

Hoffbeck presented about 30 different revenue options for people to consider, including income taxes, sales taxes, using the Permanent Fund as an endowment, reviewing oil and gas taxes and considering a state lottery.

Cuts and fiscal restraint will be critical, but cutting down to a sustainable budget will be impossible, said Hoffbeck.

“We get life, health and safety and support for life, health and safety and little more than that,” he said. “That’s what we get for $2 billion. That’s a balanced budget.”

“To cut our way to a balanced budget, that is just not a reasonable expectation,” said Hoffbeck.

There’s no escaping the reality that the state’s tough fiscal situation will continue. Oil revenues are sharply down, and multi-billion-dollar budget deficits are projected that will drain state cash reserves by 2019, leaving only the Permanent Fund and its earnings.

By 2025, Alaska could have a large natural gas export project bringing in several billion dollars a year in new revenues. That’s not a sure bet, however, and the amount of revenue is still unknown. There are only rough estimates now. 

That is academic, for now, because the state’s liquid cash reserves will be depleted five years before a gas project can be completed.

The Fairbanks conference was designed to set the stage for a summer-long process of meetings that will extend into the fall, state budget director Pat Pitney said. The governor hopes that those at the conference, armed with information on the options, will help lead the later discussions.

“The governor saw this legislative session (2015) as one of reducing costs of the budget. We felt we have to get our house in order first before we ask for new revenues,” Pitney said. “However, there is a lot of pent-up desire to talk about new revenues,” and Walker is now ready to take that step.

The governor will use the information gathered from the Fairbanks conference and other community meetings to draft revenue proposals later this year, which will be presented to legislators most likely in a special session, she said.

It seems almost every revenue-generating option has its drawbacks. Because 2016 is an election year with all 40 members of the state House and half the 20-member Senate standing for reelection, tax measures will be unpopular.

The only tool that can be implemented quickly is some form of using investment income, such as from the Permanent Fund, the commissioner said.

Under certain circumstances, taking half of the fund’s annual earnings could generate $1 billion to $1.5 billion for the state general fund. If the annual dividend were capped, say at $1,000 per year, that could reach $2 billion a year or more, according to the financial model developed for the conference.

Tim Bradner of the Alaska Journal of Commerce contributed to this story.

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