Governor’s budget proposal leaves long-term fiscal plan to Alaskans

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ANCHORAGE (KTUU) - The governor has proposed a budget for the next fiscal year but says it is just a “springboard” to discussions with Alaskans about how to solve the state’s long-term fiscal challenges.

The governor is planning a listening tour across Alaska, starting in January about Alaskans' budget priorities.

“What do they want Alaska to look like going forward?” He asked. “What kind of programs do they want? What kind of services do they want and how are they going to pay for those services?”

Included in the governor’s budget documents is a 10-year fiscal plan that includes six scenarios for the future.

“The time for pushing the hard decisions into the future is over,” reads the introduction written by the Office of Management and Budget as it projects a $1.5 billion deficit into the next fiscal year.

The first scenario proposes using the Constitutional Budget Reserve as a buffer as $1.4 billion in cuts are made over two years. Statutory Permanent Fund dividends would be paid and there would be no new taxes in the next decade.

State spending would shrink to the point that OMB describes the Alaska State government acting as a “pass-through entity” that largely doesn’t provide direct services.

“It puts the ultimate control of services in the communities’ hands for Alaskans to determine the level of government services that they want and how they wish to pay for it,” the scenario reads.

On Wednesday, during his brief comments to reporters, the governor said that over half of the budget is tied up in major spending programs like education and healthcare that would require legislation to change

Senate President Cathy Giessel, R-Anchorage, hit back at the idea that billions could be reduced from the budget. She said the Senate has a long list of possible efficiencies but “they’re not equating to billions of dollars, they’re hundreds of millions of dollars, not billions.”

Other scenarios point to reducing the PFD to pay for state services or using taxes to keep paying for government and allowing for the payment of a full PFD. OMB warns that without reductions in budget spending and a full PFD that the dividend could shrink to nothing before 2027.

House Speaker Bryce Edgmon, an independent from Dillingham, said the Legislature will likely consider changing the formula that calculates the PFD, a proposal the governor says should go before a vote of the people.

“We look forward to working with the governor on that,” he said of a possible formula change. “That allows for a healthy PFD in the present and a healthy PFD in the future.”

Giessel also spoke about the need to consider shrinking the dividend as a means to pay for state government.

“It’s going to be difficult to make this all add up,” she said. “Citizens are going to have to think about what they’re going to want to pony up.”

Beyond shrinking the dividend or cutting state services, the budget documents discuss the idea of paying new revenues. Some scenarios show a high tax burden that rises if cuts aren’t made while others show taxes that stays flat if the dividend formula is also changed.

Both Giessel and Edgmon say that new revenues will very likely be part of a budget conversation in the session starting in January.

Legislation is set to be filed in the Senate that could double the motor fuel tax to $0.16 cents, raising roughly $50 million a year. Another bill would reintroduce the education head tax, raising roughly $30 million.

A broader statewide tax, such as a sales tax, is also being “bandied about,” according to Edgmon.

The governor had previously spoken out forcefully against the idea of taxes but said it would up to Alaskans to decide if that’s what they want. Brett Huber, an aide to the governor, didn’t rule the idea out.

“Everything is on the table.”

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