This is a developing story.
A freeze on state employee hiring and travel, as well as development of new regulations, was ordered by Gov. Mike Dunleavy on Friday in what he called cost-control measures due to the state’s increasingly perilous fiscal situation.
Exemptions are being allowed for certain professions such as law enforcement employees and situations such as “essential public safety or mission-critical duties,” according to a press release issued by the governor’s office.
“In light of the extensive drop in market oil prices and the projected impact on the State’s budget, there is a need to take immediate and responsible action to control spending,” the administrative order states. “The actions set forth in this Order are being taken to reduce the impact on available funds, to focus operations on core government services, and to streamline processes and the State’s workforce towards core mission objectives.”
“The purpose of this Order is to announce an immediate freeze on all out-of-state travel, hiring, and new regulations packages. These actions are being taken to reduce the impact on available funds, streamline processes, and focus operations and the State’s workforce on the fulfillment of the State’s core mission and services. If these actions are not taken now, the State could suffer dire consequences in the future.”
The state is facing an increasingly dire economic forecast, due largely to a drop in oil prices and other economic uncertainty that has occurred during the first months of President Donald Trump’s return to office. Oil prices for the fiscal year starting July were expected to be $70 a barrel in last December’s forecast, but lawmakers say that price could now be $64 or less — and the situation the following may be even worse.
Dunleavy’s administrative order may save some money over a limited period of time, but won’t solve the bigger and longer-term fiscal challenges, said Sen. Jesse Kiehl (D-Juneau), who has seen similar orders during other occasional periods of hardship during his 25 years at the Alaska State Capitol as a legislator and staff member.
“This is a way to save a couple bucks short term,” he said. “So as long as you’re careful with it and you don’t drive up your costs long-term it can help in a pinch. How long are oil prices going to be low — two years, three years? I can’t predict them, but if you try and do this for three years you’re going to burn out the rest of state government, and your costs are going up, up, up, up.”
Dunleavy proposed a $14 billion budget for the coming year with a $2 billion projected deficit (including carryover debt from the current year) due mostly to a so-called “full” PFD of about $3,800. The House trimmed that to a roughly $12 billion budget with a $500 million deficit and a $1,400 PFD. The Senate recently passed a budget that balances by making various agency cuts and providing the lowest inflation-adjust PFD in history of $1,000.
An irony of the travel freeze is Dunleavy has spent most of the legislative session outside Juneau, including extensive travel to other states and abroad. Much of that has been in support of Trump’s agenda on oil and other resource extraction, which the governor asserts will ultimately greatly benefit the state financially.
“So the great big giant question is will the governor be flying around to East Asia and D.C. on gas line efforts?” Kiehl asked.
A spokesman for Dunleavy did not immediately provide a response to that question Friday evening. The Alaska Landmine on Sunday reported “Dunleavy, several commissioners, and heads of other state agencies are in D.C. this week at an investment conference.”
Members of the governor’s staff have also generated controversy recently for their travel. Attorney General Treg Taylor took a corporate-funded trip to South Africa and France last year, while Department of Revenue Commissioner Adam Crum took an unauthorized family trip to Hawaii that he failed to submit proper leave slips for, according to published reports.
Provisions of the order include:
• A freeze on all out-of-state travel by state employees and individuals traveling on behalf of the state regardless of funding source.
• A statewide hiring freeze except for “public safety or essential services” such as law enforcement, 24-hour care facilities, and “frontline positions at agencies like OCS and the Division of Public Assistance.”
• A freeze on new regulations not already sent out for public notice.
Dunleavy also sent a letter to legislative leaders Wednesday stating he wants to form a “joint team” after the session to to “develop a comprehensive, sustainable long-term fiscal plan that ensures stability and fosters economic growth.” Numerous declarations and efforts at a “long-term fiscal plan” have come from state lawmakers for many years, including a fiscal policy working group in 2021 that Kiehl was a member of and issued a detailed set of recommendations. Those recommendations has failed to get traction in the Legislature.
“The fundamental pieces and the basic structures haven’t changed,” he said.
Another member of that group, Senate Minority Leader Mike Shower (R-Wasilla), said Dunleavy’s request offers a new opportunity to pursue the minority caucus’ goals such as a state spending cap and scrutinizing the necessities of state agency functions.
“As a previous member of the Fiscal Policy Working Group, the Legislature has studied and discussed and debated fiscal policy for the better part of five years,” he said in a prepared statement. “Now is the time for action. With the governor’s cooperation, I am certain we can work collaboratively to create policy and legislation that will make it across the finish line.”
• Contact Mark Sabbatini at mark.sabbatini@juneauempire.com or (907) 957-2306.
