The following Q&A was conducted with Gov. Bill Walker on Dec. 23, 2015, at the Juneau Empire. This is part one of the interview. Part two will publish Monday and part three on Tuesday. Responses have been edited down in some parts due to space.
What were your thoughts on the federal transportation budget recently released?
Any time we see any federal dollars coming to Alaska we celebrate that. We have really patterned our whole capital budget almost exclusively on federal match in order to make sure we have matching dollars for the federal side. So I’m very pleased with that.
What are your priorities for where those dollars are spent? In Southeast people want money for ferries, but up north DOT is struggling just to plow roads. Is there one area that has more need than others?
We’ve closed down some facilities up north, some maintenance camps are being closed down, and I’m hearing about that a lot, especially as it starts to snow more, and various maintenance camps that have been open in the past are not going to be this year.
I certainly think a certain amount will be associated with maintenance, but we really try not to look at our transportation system as anything other than a sort of wholistic transportation system — everything from an airport in debt … to the ferry system in Southeast. We don’t really separate it out that way, we never really had that, “this much goes for highways, this much goes for ferry system,” we just look at the whole system. And one thing we’ve been doing in the ferry system is that we have had some internal meetings and said, you know, before making decisions we want to make sure we sit down with the local communities, and not sit down to tell them what we’re going to do, sit down and say, “Here’s our situation, here’s our options, which one would impact you the least?” As we’ve learned before, when you change the ferry schedule, people rely upon that years ahead. In other words, there’s reservations for B&B owners that have guests coming in, you have freight, you have businesses, so what we’re trying to do is not make sort of knee-jerk schedule changes, but make sure that if there’s going to be a schedule change … (we) make sure that it’s as far out as possible so people have the leave time to prepare for that.
And again, we call it listening sessions. The dust will level sometimes pretty high, which is understandable considering the impact that the ferries have to the community. I think it’s helpful that we have a governor from a ferry terminal location and a lieutenant governor also from a ferry (location). We both have, you know, long connections with the Alaska Marine Highway System with Valdez and Yakutat (respectively). Valdez is a bit different because we do house the Richardson Highway connection. So a life-button for a lot of our tourism is the ferry system.
Has the relationship between you and Lt. Gov. Byron Mallott been what you expected? Does it bring that balance between a more conservative approach with a liberal approach, and having the ties from the Interior and Southeast Alaska?
It’s far exceeded that. Our relationship really isn’t about one position or another position, it’s really about what we combine and really feel about a particular issue. It has been extremely comfortable. Whenever I speak I always say I’m the luckiest governor in the country because every day I go to work with Byron Mallott. He has a depth of background with different administrations and just is very helpful. We talk about what Gov. (Bill) Egan used to do or what Gov. (Jay) Hammond used to do, and it’s just unique to have somebody … at your side that can have that discussion. We try to meet on a weekly basis, just the two of us, to talk about the week (and) what’s going on. We’re actually doing that this afternoon. I really look forward to those because it’s not that he’s a sounding board, he has a depth of Alaska’s history and also some vision of where we can go. Sometimes, we get too close to a tough decision on something and he’ll say, “Governor, we didn’t do this to do anything other than make some bold steps and bold decisions, because if we won’t who else will?” So that’s been helpful for me.
I didn’t think our relationship could get better, and I have to say it has just because we’ve had that opportunity to spend more time together. The only frustration is that we’re not allowed to travel together, the governor and lieutenant governor typically don’t travel in the same mode of transportation. … We typically aren’t in the same location at the same time… But it just couldn’t be better. I can see how there could be friction, in the system that we have it’s sort of like an arranged relationship, and ours wasn’t. I can’t imagine any governor-lieutenant governor having a better relationship than we have.
I talk all the time about this picture, this gift he bought to me, and I just start with that. … In Metlakatla, he bought me a gift. It was all wrapped up as a present. It wasn’t a Christmas present, it wasn’t a birthday, it was just a gift. He said, “I saw this and thought of you.” I have the picture in my office of Metlakatla in about 1915. In fact, I blew it up into a big poster board during our roll out of our fiscal plan, and it’s people in a river, muddy boots on, a rope somewhere — you look at it and you don’t know exactly what it is. But what it is is in 1915, when they had to pull stumps out in Metlakatla, they would all get together, the whole town would show up and pull on the rope. Byron wrote on the bottom of the picture, “Governor, this is what we’re doing — we’re all pulling together.” That’s what we needed to be doing. It matches the theme of so many things we’ve been doing. I talk about that a lot, and I tell Alaskans that we need to be pulling together just like they did in Metlakatla in 1915.
If the Legislature were not to incorporate your budget proposal, which includes the sovereign wealth model, this year, there wouldn’t be enough money in the Permanent Fund next year to close the budget gap without leaving billions unaccounted for. So, if the Legislature doesn’t follow your budget closely, if it doesn’t enact the sovereign wealth model, what do you see as the future of Alaska in 2017 and beyond?
Our ability to self-heal becomes much, much more challenging. And I call it self-heal because I say that we don’t have a wealth problem, we have a cash-flow problem and we can cure or significantly improve our cash flow problem with how we utilize our wealth. And so, every year that we don’t do that, that we draw down $3.5 billion out of that savings, it moves very quickly from much more difficult to impossible to resolve it that way. We’re looking for the least painful way of resolving the situation we’re in.
Some have said … “sit back and the price of oil will rise again.” I personally can’t do that knowing sort of where that cliff is out there. In five years, there’s no permanent fund at all. It goes to zero. Not just the dividend, what we’re drawing on, (but then) we’ve gone through the Constitutional Budget Reserve and … we’ve gone through all the earnings reserves, just trying to stay afloat. Then what do we do?
At that point all you have left is the corpus of the Permanent Fund, and that takes a vote of the people. They’re most likely to say, “thanks, but no thanks.” It’s pretty significant. Very significant. It is very important to get that taken care of this year.
With the entire plan you’ve proposed, it’s easy for some critics to take one particular piece from it and say Alaskans are going to lose $1,000 from their Permanent Fund Dividend check. And there’s a lot of folks that call it a raid even though PFD checks might not even be there in five years if budget reserves are used to balance the budget. What would you say to someone who thinks the state is taking their PFD rather than cutting its own expenses?
I hear that a lot, so this is an easy one to respond to. … Our goal is to keep the Permanent Fund permanent, and while we’re adjusting it in such a way that the funding source is different than it is now — it would be tied to our royalties off our resource development — it’ll bring it back down to about what it’s been historically. The average has been about $1,150, since the beginning of Permanent Fund, even through this last one. It’s about $1,150. It brings it down to about $1,000. … It’s a matter of keeping the Permanent Fund for the future generations. What I sometimes ask folks that are adamant to keep it at the full amount it was last year, I ask them how many years did they plan to be here? If they’re going to be here longer than four years, they should be concerned about that because when it goes to zero, that will be a significant impact. It’s a tool that it’s time to use and if we don’t, the other tool is much more painful than what we’re looking at doing.
No one likes every piece of the plan, I don’t like every piece of the plan, but I think most people realize, or a lot of people realize, that there has to be some give and take, there has to be additional cuts. We agree with that. If we laid off every state employee, we would not put much of a dent in the deficit at all. We know we can’t get there by cuts. … I think we owe it to Alaskans as we reach into their pocket that we have made the adjustments ourselves in that process. … What this plan will do is it will put Alaska on an allowance that when oil, if it goes to $150 (per barrel) … the allowance will stay the same. The problem is we have chased every dollar, every dollar finds a home. Historically, as we’ve chased $147 oil, the budget tends to go all the way up. Fortunately, they put money aside and thank heavens they did because that’s what we’re drawing on now, but we just can’t have that cycle that we’re chasing the single commodity as we’re doing now. This will change that. This last year we made more revenue off our investments than we did off our resource development. We crossed that line. It’s a combination of the low oil throughput and the price. The last time we were here in this situation in the mid-80s, throughput was about 2 million barrels a day. So now, here we are at 500,000 of barrels a day with low prices. There’s no shock absorber.