Gov. Bill Walker unveiled the first “balanced budget” draft of his four-year term Nov. 26, but it will be up to Gov.-elect Mike Dunleavy to decide whether to implement it.
Walker didn’t release exact numbers, but according to figures presented to the Anchorage Chamber of Commerce and in a spreadsheet released to the Anchorage Daily News, his budget appears to increase state spending by about $330 million for the fiscal year that begins July 1.
That money would partially come from oil: The state is forecasting oil prices to average $76 per barrel during the current fiscal year, which ends June 30, and $75 per barrel next fiscal year.
“Through over a billion dollars in cuts and the restructuring of the Permanent Fund and a little bit of relief on oil price, this year’s budget is a balanced budget, and that’s what we’ll be handing off in a week,” Pat Pitney, Walker’s director of the Office of Management and Budget, told Chamber members.
It’s unclear how much, or if any, of the plan will be taken up by Dunleavy, who takes office Dec. 3. Under state law, the sitting governor is responsible for sending a budget proposal to the Legislature by Dec. 15.
“Typically, they don’t stay the same, and that’s certainly appropriate,” Walker said.
Walker isn’t the first governor to publicly unveil a budget before leaving office. Frank Murkowski did it in 2006. Incoming Gov. Sarah Palin promised to cut that proposal by $150 million, only to eventually sign an operating budget that increased spending and was the second-largest in state history at that point.
Walker himself received a transition budget from departing Gov. Sean Parnell, who is now an adviser to Dunleavy.
The governor’s budget proposal is always raw material for the legislative meat grinder. State lawmakers have their say on the budget and can take it in radically different directions from what was proposed by the governor. Walker’s announcement, given that Dunleavy will have his own opinions, amounts to a first draft of a first draft.
And that’s before the real world enters the picture.
When lawmakers ended their legislative session this year, they approved a budget of $11.2 billion. At the time, the Alaska Department of Revenue estimated that North Slope oil prices would average $63 per barrel and that production would average 526,600 barrels per day between July 1, 2018 and June 30, 2019.
At those prices and production levels, the state was expected to have a deficit of about $693 million.
So far, production has been only slightly below that estimate. Prices have been much higher, even with the recent dip. Through the end of last week, they’ve averaged $75.46 per barrel, more than enough to erase the deficit.
“We will now expect a surplus,” said Sheldon Fisher, Alaska’s commissioner of Revenue, to the Chamber crowd.
Walker is proposing to spend $230 million of that surplus on deferred maintenance projects across the state. He called it an effort to generate construction jobs and said that when combined with matching funds, it could generate as much as a billion dollars in economic activity.
Other spending increases would go toward public education and public safety.
In addition to oil, Walker and his advisers talked about the importance of Senate Bill 26, the Permanent Fund plan approved by the Legislature. That plan, signed into law earlier this year, calls for a regular transfer of money from the Permanent Fund’s investment earnings to the state’s accounts. That transfer can be divided between state services and a dividend however lawmakers wish.
This year’s transfer was $2.7 billion. Next year’s will be $2.9 billion, thanks to the rising value of the fund.
Walker is proposing an $1,800 Permanent Fund dividend, which would cost $1.17 billion. Dunleavy proposed a larger amount while campaigning for governor.
“That will be a decision that the Legislature will have to make and the administration will have to make going forward,” Fisher said.
Dunleavy taps consultant as budget director
Donna Arduin is a little bit jet-lagged, but she’s ready to work.
On Nov. 26, Arduin, president of the financial consulting firm Arduin, Laffer & Moore Econometrics, was one of four officials named by Gov.-elect Mike Dunleavy for his new cabinet. Arduin will serve as the director of the Office of Management and Budget.
The other three appointments:
• Jonathan Quick, chief of staff to Kenai Peninsula Borough Mayor Charlie Pierce, as commissioner of the Department of Administration.
• Adam Crum, executive vice president of Northern Industrial Training, as commissioner of the Department of Health and Social Services.
• Jason Brune, Cook Inlet Region Inc.’s senior director of land and resources, as commissioner of the Department of Environmental Conservation.
The four follow the appointment of John MacKinnon as commissioner of the Department of Transportation and Public Facilities, Corri Feige for the Department of Natural Resources and Tamika Ledbetter for the Department of Labor and Workforce Development.
As Arduin’s name was announced by press release, she was settling into a transition office six floors below the Juneau headquarters of the Office of Management and Budget.
“I’ve done this many times before in other states. It’s what I’m passionate about,” she said of budget work.
Arduin was living in northern Michigan when she got the call from Dunleavy, she said, and she was fewer than 48 hours removed from her arrival when the governor-elect announced her appointment.
Arduin has a reputation as a budget fixer for Republican governors. She was deputy director of the budget for Michigan Gov. John Engler in the early 1990s, then joined New York Gov. George Pataki in 1995. Florida Gov. Jeb Bush named her his budget director after he won election in 1998.
She moved across the country in 2003, becoming budget director for Gov. Arnold Schwarzenegger, but left that job after 11 months of shepherding the celebrity governor’s then-new administration.
In 2005, she joined Arthur Laffer, an adviser to President Ronald Reagan, and created Arduin, Laffer & Moore Econometrics. Laffer is known as the father of supply-side economics.
As a consultant, she has advised Republicans across the country, including Florida’s Rick Scott and Marco Rubio.
In her various roles, she has favored libertarian and Republican approaches to fiscal policy, including broad tax and spending cuts.
Her approach has garnered critics. In California, legislators were outraged by proposals to cut social services, and in Florida, the Sarasota Herald-Tribune published a detailed story in 2014 focused on controversial work performed by her firm.
Talking Nov. 26, Arduin said she has worked all over the country, but Alaska has an advantage in that it is a relatively new state, and it is easier to change things.
“Alaska has some unique opportunities to build some things anew,” she said.
She said she is familiar with states that have drastic fluctuations in revenue, thanks to her experience with California’s income tax system.
She said she wants to change the state’s “structural deficit” and provide fiscal stability.
Summed up, that goal is straightforward: “Have predictability for dividends and those who rely on state money every year,” she said.