Former state Senator Mike Dunleavy, left, Gov. Bill Walker, center, and former U.S. Senator Mark Begich shake hands after a debate at a Juneau Chamber of Commerce luncheon at Centennial Hall on Thursday, Sept. 6, 2018. (Michael Penn | Juneau Empire)

Former state Senator Mike Dunleavy, left, Gov. Bill Walker, center, and former U.S. Senator Mark Begich shake hands after a debate at a Juneau Chamber of Commerce luncheon at Centennial Hall on Thursday, Sept. 6, 2018. (Michael Penn | Juneau Empire)

Opinion: Begich would tax, Dunleavy, cut. Whoever wins will have to act fast.

The two major candidates for governor, Mark Begich and Mike Dunleavy, have different philosophies on how to tackle our structural budget deficit.

Begich would draw 4 percent of the market value of the Permanent Fund and dedicate half to dividends and half to education, as well as transfer $14 billion from the Earning Reserve to the principle of the Fund. He also proposes bonding for $3-5 billion for a large capital budget over the next six years and to pay off the loan using a portion of the existing yearly capital budget. Loan payments will be over $200 million for twenty years if we borrow $3 billion, and the divertible capital budget is no more than $100 million, adding about $100 million to the deficit annually. However, his plan has lower dividends and produces approximately $300 million more from the Permanent Fund draw spent on government. Other than those two items, Begich’s fiscal plan is largely focused on the structure of accounts and fund flows and does not have substantial impact on the deficit.

Begich does not want major cuts. He states that if other elements of his fiscal plan are passed, he would adopt additional revenue measures as needed so long as they do not fall disproportionately on the needy. Thus taxation is a primary tool he will use to address the deficit.

Dunleavy is pursuing a different approach. Rather than immediately reducing the dividend and adopting taxes, Dunleavy indicates his plan is designed to rebuild the people’s trust. He intends to do that by reducing the operating budget through spending cuts. He has not identified all the cuts he will make or the total magnitude, instead committing to delve deeply into the effort once in office. Dunleavy is also a proponent of adopting a spending cap to prevent the budget from growing too fast in the future. He also believes in seeking the people’s input through a constitutional amendment or advisory vote to let Alaskans decide how to treat the dividend. If these things happen, then voters will be more open to a discussion around other fiscal options like how to use the Permanent Fund. Finally, Dunleavy is optimistic and determined to spur the development of Alaska’s resources to generate new state revenues.

So where does this leave Alaska? Both plans leave a structural deficit of about $1 billion at $70 per-barrel oil that gets reduced and approaches a balanced budget north of $80 per barrel. Begich intends to address the deficit by focusing on taxes, and Dunleavy by focusing on cuts in the short term and growing Alaska’s resource economy in the long term. Neither has identified many of the details around their proposals, but the deficit is a bit of a moving target, and specifics will develop once the new governor takes office.

However, the governor and Legislature must be prepared to act rapidly. Since oil prices fell in 2014, the structural deficit has been funded by savings. Although the Permanent Fund is now being used to contribute to government, cuts have been modest, and no tax package has been adopted. Consequently, state savings have fallen from over $10 billion when Gov. Bill Walker took office, to just over $2 billion when he will leave. That means at $70 per-barrel oil, we can only fund the deficit for about two years.

Unless we get lucky with high oil prices, we have no option but to act. What I like about this election is the clear choice voters have about what that action looks like. Do we cut or tax?

My personal experience serving in state government has convinced me that cutting first is the right approach, which is why I am supporting Dunleavy. But regardless of who wins, it is important that the next governor be viewed as having a mandate for their approach and that we act rapidly.


• Craig Richards is an attorney in private practice in Anchorage. He is Chairman of the Alaska Permanent Fund Corporation and former Attorney General of the State of Alaska. These views are strictly his own and do not reflect those of his clients or the Alaska Permanent Fund Corporation.


More in Opinion

Web
Have something to say?

Here’s how to add your voice to the conversation.

U.S. Sen. Dan Sullivan addresses a joint session of the Alaska State Legislature in the House chambers on Feb. 7, 2023. (Mark Sabbatini / Juneau Empire file photo)
Opinion: Sen. Sullivan sinks to a new low

Last week, Sen. Dan Sullivan mimicked Donald Trump’s endless stream of baseless… Continue reading

Members of local business organizations greet cruise passengers with maps and other handouts as they disembark from the Norwegian Bliss on April 25, 2022. (Michael S. Lockett / Juneau Empire file photo)
A call for collaboration, not restrictions on cruise ship tourism

Please don’t sign. I feel it is time to speak up about… Continue reading

Juneau School District Superintendent Frank Hauser provides an overview of restructuring options being considered during a Community Budget Input Session at Thunder Mountain High School on Jan. 31. (Mark Sabbatini / Juneau Empire file photo)
Opinion: Smearing school board members and the superintendent is vindictive and destructive

A school consolidation plan announced by the Juneau School District (JSD) has… Continue reading

(Juneau Empire file photo)
Letter: Gloomy predictions for ship-free days are a misleading scare tactic

“What? Only one day a week ship-free? Can’t we have Sundays too?”… Continue reading

(Juneau Empire file photo)
Letter: A day of rest from cruise ships is good for Juneau

A lot has been said about the Saturday free day from large… Continue reading

(City and Borough of Juneau photo)
My Turn: Property tax assessment and guardrails

The “money grab” by the CBJ Assessor’s Office is over with passage… Continue reading

Most Read