I read with some satisfaction — and disappointment — Senate President Pete Kelly’s recent opinion piece, “The Sky Is Not Falling.” While I share his optimism regarding North Slope oil production, I am sorely disappointed that he continues to issue statements that rationalize ignoring our fiscal crisis.
I also object to President Kelly’s false claim that my administration manipulated oil revenue forecasts to justify new revenues. Nothing could be further from the truth, and I will not allow his fabrications to go unchallenged. The hard-working members of the Department of Revenue serve with integrity as they strive in good faith to solve Alaska’s fiscal crisis.
Yes, recent technological advances by North Slope producers have slowed the decline in our older fields. Exciting new developments which have been talked about for years are now close enough to reality that a modest increase in throughput in TAPS is possible. I applaud the splendid work of the producers on these fronts.
The additional revenue from this production, compared to previous forecasts, could reach $500 million per year by 2026. As encouraging as this sounds, that additional revenue would only help our income keep pace with inflation. If the state continues to provide the same services it does now, when adjusted for modest inflation, we’ll continue to see annual budget deficits similar to what we have today.
Sen. Kelly noted, “The Senate will support new revenues only when it is proven to be in the best interest of Alaskans as a whole, not just their government.”
Here’s where Kelly and I agree: We have now reached that point where it is in Alaska’s interest to diversify our revenue stream. The benefits Alaskans would gain from stable and sustainable state services outweigh the cost of a small additional tax.
As Kelly knows, nearly 50 percent of the state operating budget goes directly to local communities. In his community’s case, this includes a portion of education funding in the Fairbanks-North Star Borough, law enforcement and school debt reimbursement for the Fairbanks area, University of Alaska Fairbanks funding, health care for those in the Interior, safe roads in the area, and more. These are all critical services that support Alaskans, not their government. But they cannot be maintained with our current revenue.
The Legislature has already made significant reductions to state spending. These budget cuts — from $7.8 billion in 2013 to $4.3 billion this year — impact every department and every Alaskan. Smart cuts will continue and efficiencies will be found, but the truth is that the fat my administration inherited is largely gone: muscle and bone are now at risk.
While denying our fiscal reality, those in the Legislature who oppose any new revenue have spent down $14 billion in savings, with nothing to show for it. We could have funded the state’s deferred maintenance many times over with that money, yet some still refuse to act.
Nearly all legislators agree that a Permanent Fund restructuring which protects the fund and preserves a dividend is an essential part of the fiscal solution. But that alone won’t get us to a balanced budget.
Kelly acknowledges this deficit, yet feels additional revenues are unnecessary. His claims are based on overly optimistic assumptions of revenue growth and unrealistically static expenditures for years to come.
Our savings are all but gone. Credit rating agencies continue to downgrade our borrowing ability. Billions of dollars in deferred maintenance are going unfunded. We simply can’t count on improbable outcomes; there’s too much at stake.
My administration’s small revenue proposal is reasonable fiscal policy, and will still leave Alaskans as the lowest-taxed Americans. It also ties Alaska’s budget to the state’s economy, so that when growth occurs, we can collect the additional revenue needed to provide the roads, schools, troopers, and other services new jobs and people require. Moreover, for the first time, nonresidents — who make up about 20 percent of our workforce — will finally start contributing to the cost of essential services they use.
No, the sky isn’t falling, not even close. Alaska is strong, and we have world-class resources and enviable assets set aside for just this moment. The combination of wise use of our Permanent Fund with a small and limited new revenue source can put us back on the path to prosperity. To those who propose to do nothing, I say that Alaskans deserve results, not rhetoric; solutions, not slogans. The time to act is now.
• Gov. Bill Walker is governor of Alaska.
