OPINION: Status quo isn’t sustainable
There’s been no shortage of sturm and drang over Gov. Michael J. Dunleavy’s proposal to radically overhaul the state budget with deep cuts to K-12 and university education, Medicaid and the state ferry system.
What there has been very little of from the defenders of the status quo are alternatives to achieve better outcomes and reform the state’s unsustainable spending habits.
After avoiding it for more than a decade thanks to triple-digit oil prices followed by spending down state savings and dipping into the Permanent Fund Earnings Reserve and dividend appropriations to cover the deficit since multi-billion dollar shortfalls hit four years ago when prices bottomed at $26 per barrel, the time of reckoning has finally arrived.
Competing roadshows from the governor and the House Finance Committee are now traversing the state with diametrically opposed goals: one by the Republican governor that favors cutting services to match revenues, capturing local property taxes on oil properties and leaving the PFD untouched and the other that has been organized by the Democrat-led House in order to give vent to public outcry over the drastic proposed reductions and a venue for PFD cuts and new or increased taxes to fund government.
Neither solution is achievable in the reality of a divided government in Juneau, but only one recognizes the old axiom known as Stein’s Law: “if something cannot go on forever, it will stop.”
The simple fact is the state is spending more than it can afford, and until appropriations are brought in line with reality the PFD will continue to be reduced until it either goes away to fund the budget or a statewide tax regime will have to be imposed to balance the books.
Raising taxes on the oil industry won’t do the trick, and driving out investment for the short-term objective of plucking the golden goose will only accelerate the revenue shortfall.
Dunleavy has been accused of being heartless or amoral for his proposed budget, but is it any less heartless to continue to accept failure as the best we can do while spending our way into oblivion?
The governor isn’t wrong to point to Alaska’s dead-last ranking in reading as a failure of our education system. That doesn’t mean he hates kids.
The governor isn’t wrong to point out ferry ridership is falling as costs are rising. That doesn’t mean he hates Southeast Alaska.
University of Alaska President Jim Johnsen can claim the UA system is “more vital than ever” but that doesn’t change the fact that its largest campus can’t graduate teachers after losing its accreditation.
Hundreds of millions in “free” federal Medicaid dollars have no doubt boosted the health care sector of the economy during the three-year recession, but the governor is not wrong to point out that outcomes aren’t improving.
The last thing a state should be proud of is having nearly 1 out of every 4 residents on Medicaid. The goal of state policy should be to get as many of these people to work and off assistance.
There are no doubt flaws with the governor’s proposed budget, from the abrupt rollout that shocked many if not most observers around the state and the resulting failure to get any buy-in from stakeholders, not to mention falling far behind in the messaging battle, to the sheer scale of cuts this large in one year.
Restoring a full PFD according to the statutory formula was the centerpiece of Dunleavy’s campaign and a sudden reversal of that pledge would be political suicide. That doesn’t mean, however, that $1.9 billion in dividends amid the biggest budget cuts in history is the wisest long-term plan, either.
That means a compromise is going to have to be in order. But in order for there to be a compromise, both sides need a vision and a plan as starting points. So far only Dunleavy is checking those two boxes while the Legislature appears to be choosing the same can-kicking path of the past decade in a dangerous game of chicken with the veto pen.
One way or another, that which can’t continue, won’t. What takes its place will decide our future and the great question of the day is whether our elected officials are up to the challenge.
Andrew Jensen can be reached at [email protected].