Cliff Groh

Cliff Groh

“These reductions are not meant to harm Alaska or Alaskans, but to turn the corner and make the necessary changes in order to put Alaska on a sustainable path forward.”—Alaska Governor Mike Dunleavy Tweet, July 29, 2019

Is an ideological desire for a much less populous and less-educated—and less Democratic—Alaska the real motivation behind Gov. Mike Dunleavy’s draconian budget vetoes?

The Governor has said that his proposed budget cuts and vetoes reflect the reality of the State of Alaska’s much lower oil revenues since 2014 as well as his confidence that putting our state’s fiscal house in order will draw a flood of job-creating investment to the Last Frontier.

Those defenses offered by Gov. Dunleavy run headlong into some inconvenient facts. First, the State of Alaska has other fiscal options, which include less drastic budget cuts made over a longer period; a restructuring of the uses of the Permanent Fund earnings; levying of broad-based taxes such as income or sales taxes; and/or changes to the oil tax system.

Second, people who handle big money in Alaska do not see any rush of private investment triggered by the Governor’s approach to big-time fiscal austerity. Instead, these CEOs, bankers, and business owners and operators warn that the Dunleavy meat axe will hurt—not help—the Alaska economy. Notably, both the Anchorage Economic Development Corporation (AEDC) and the University of Alaska’s Institute of Social and Economic Research (ISER) predict that the Governor’s vetoes will bring a recession.

Substantial evidence suggests that the particular budgetary choices made by the Governor stem at least in part from his ideological agenda aimed at producing a population much lower than Alaska’s current 735,000 people.

While a State Senator, Mike Dunleavy told a reporter that Alaska needed to have 100,000 fewer people. (This statement implies more than a 13 percent drop in the population.)

A high-ranking official in the Dunleavy administration told a business executive this year that Alaska would be better off if the state’s population was 300,000 smaller, as that number of people would be one that the economy could support. (This statement implies more than a 40 percent drop in the population.)

Gov. Dunleavy told the Ketchikan Chamber of Commerce in April that “I’m going to take us back to the ‘60s. We were a state of 250,000, maybe 300,000, and our budgets back in the mid-to-late ‘60s were about $175 million per year.” (The higher figure of 300,000 people implies almost a 60 percent drop in the population, and this quotation comes from an Alaska Public Media report from April 9, 2019 found at on the Internet.)

Population declines in Alaska of these magnitudes require both a massive out-migration coupled with depressed in-migration, which is a pattern last seen in the mid-to-late 1980s. (The one Dunleavy administration official I have personally spoken with about these reports has specifically denied that the administration seeks a major population drop in Alaska.)

Who Does Gov. Dunleavy Want to Live in Alaska? And Why?

Beyond the size of the Governor’s desired population for Alaska, there are also the question of its composition. Under this scenario, who are the people left on the Last Frontier?

A long-time Alaska political observer has told me that Gov. Dunleavy apparently believes that it would be the poorest people who would leave Alaska in a crash. The Governor’s budget cuts and vetoes do seem to cruelly target the most vulnerable Alaskans given the slashing of funding for homeless services, housing programs, pre-K, dental services, and Medicaid. On multiple levels, however, the idea that the Governor’s vetoes would disproportionately drive the poorest people out of the state is just silly. It’s not only that many of the poorest Alaskans have some of the deepest roots in the state; as one of my friends pointed out, the poorest Alaskans couldn’t afford bus fare to the airport, much less buy an airplane ticket.

Less silly, however, is the idea that gutting the University of Alaska--and decimating K-12 education, the obvious plan next year--will help drive the better-educated people out of Alaska. It’s the people with options who are more likely to leave Alaska if/when the state economy goes into another recession. The Governor’s proposal to hack funding for research—an element of the University that draws in $6 for every $1 spent by the State of Alaska—especially seems to show a desire to start a brain drain. (Drastically cutting research funding would also cripple climate research, a step that might give joy to the Koch brothers, the Kansas-based energy magnates who are the Governor’s ideological allies.)

Speaking of ideology, an oil industry executive suggested a more baldly political motive for the Governor’s cuts to the funding of the University, the biggest single target of the vetoes. Chopping funding for the University of Alaska would tend to drive Democrats out of Fairbanks—where the University plays a particularly big role in the economy—and thereby create more Republican seats in the Legislature.

More generally, the Governor’s vision for Alaska relies much more heavily on oil and hard-rock mining to the apparent exclusion of other job-creating fields. As more than one observer has noted, natural resource warehouses—like all warehouses—do not require many people. If Gov. Dunleavy’s cuts result in a dearth of skilled labor in Alaska and thereby shrink the labor pool, our state may see an increase in transient out-of-state workers.

Does Gov. Dunleavy Believe that Creating Chaos Helps Him Politically?

The Governor’s proposed budget and budget vetoes are so devoid of standard logic that two other sentences come to mind. David Teal, the ordinarily mild-mannered Director of the Alaska Legislative Finance Division, said in February after Gov. Dunleavy issued his proposed budget that “Looking at the lack of justification, I began to wonder whether the budget was designed in some way to create chaos.”

Another relevant saying is one frequently attributed to the Bolshevik revolutionary Vladimir Lenin from the days when the Czar ruled Russia: “The worse, the better.”

Whether Gov. Dunleavy’s extreme budget cuts and vetoes are aimed at a much smaller population more matched to a smaller economy or at a more docile and less Democratic Alaska—or both—you need to know that he will continue to push for more lacerations to the budget. Alaskans must prepare for a multi-year fight and support those who offer less destructive alternatives.

The Governor’s vision of how many people—and what kinds of people—should live in Alaska could loom in the recall effort, particularly for some Alaskans who voted for Mike Dunleavy last November. Republicans tend to be business-oriented and have traditionally favored a much bigger population for the Great Land that is fueled by government spending—think of Wally Hickel and his boomer philosophy of wanting the State of Alaska to spend on costly megaprojects to juice the economy. A much smaller population for Alaska would make it hard for many businesses to keep open; it would also be difficult to sell a home.

Alaska does need to change course, but Gov. Dunleavy’s burn-down-the-house approach is not the only road open. I personally support a continuing search for budget efficiencies; a restructuring of the uses of the Permanent Fund earnings to both constitutionally guarantee a sustainable Permanent Fund Dividend and allow greater revenues for vital public services; a reinstatement of a personal income tax like Alaska used to have that would capture some of the hundreds of millions of dollars made by out-of-state workers; and an examination of the oil tax system to see if it can generate more revenues while remaining internationally competitive. Your mileage may vary, but the time for falling for fantasies or staying on the sidelines is over.

Cliff Groh has observed and participated in the debates regarding Alaska fiscal policy for almost 40 years. He was the legislative assistant who worked more than any other on the legislation in 1982 creating the Permanent Fund Dividend Alaska has today.

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