One promise I made to Alaskans was to present you with a permanent fiscal plan, one in which we tackle our economic challenges and start bringing fiscal responsibility to Juneau. Combined with a series of legislative proposals and constitutional amendments, a major element of that commitment is addressing the state’s out-of-control spending.
This year, we’re presenting the Legislature with an annual budget that takes an open and straightforward approach. Rather than starting with the bloated budgets of the past and asking ourselves “where do we cut,” we did exactly what Alaskan families and small businesses are forced to do when faced with financial hardship. We started from the ground floor and built an annual budget where the amount we spend aligns with the amount we bring in, an approach that built a budget up rather than reducing a budget down.
As we’ve all seen, for too long, politicians haven’t been honest when it comes to the numbers and the seriousness of our fiscal woes. We’ve seen misleading figures and confusing budget tactics; we’ve relied on massive amounts of savings and Alaskans’ Permanent Fund dividends to grow the size and reach of government – all while never seriously tackling the issue of spending. Today I’m here to say: Those days are over. We can no longer spend what we don’t have, and we can’t pretend otherwise.
The economic outlook Alaska faces today is dire. After burning through nearly every dollar in the state’s savings account — more than $14 billion during the past four years — we are faced with another $1.5 billion deficit, and less than a year in reserves. The gradual glide path approach, which lawmakers called for repeatedly since the rapid decline in oil prices, never came to fruition. Oversized budgets and outmatched spending continued with little recourse.
In building this budget, my team and I worked across government to identify efficiencies, duplication and cost savings to restore the core principles of government responsibility. We built a balanced budget in which expenditures do not exceed revenues; a budget that shows Alaskans the realities of where we are and the tough choices that have to be made. We looked for logical constraints on government and built a budget based on these core tenets:
- expenditures cannot exceed existing revenue;
- the budget is built on core functions that impact a majority of Alaskans;
- maintaining and protecting our reserves;
- the budget does not take additional funds from Alaskans through taxes or the PFD;
- it must be sustainable, predictable and affordable.
The foundation of my budget is based on the principle that expenditures cannot exceed revenues. For the first time in decades, our budget will match the money we spend as a state with the revenue we bring in as a state. This year, based on the revenue we have identified and the dollars made available through previously enacted law, we built a budget based on $4.6 billion in revenue. The differences in funding, the consolidation of core services and the changes to programs take a serious approach to our financial situation, while reflecting a sincere commitment to put the full amount of the Permanent Fund dividend back into the hands of Alaskans.
Our focus also prioritized the core functions of government, functions that impact a majority of Alaskans. This truth-in-budgeting-approach examined required state obligations, the size and scope of government, services and needs, and resulted in a budget that for the first time gets our fiscal house in order. It includes a number of government-wide initiatives to improve effectiveness and refocus spending, including constraints on government travel, limits on top-tiered government wages, reforms to government procurement and reorganization of staff and departments. While some will describe these and other reforms as drastic, I say to them: Show me a proposal that stops our unsustainable spending trajectory and accounts for our current financial dilemma.
In order to protect what little savings remain, we have prioritized maintaining and protecting what little we have left in reserves. The days of spending everything we have and avoiding the tough decisions for our future must end. If this spend-at-all-cost mentality is allowed to persist, Alaska’s economic outlook will only grow darker and the future of the Permanent Fund dividend will diminish by the day.
Based on the will of the people and a sincere belief that we can’t tax our way out of these fiscal challenges, my budget proposes no new revenues from Alaskans. While some wish to ignore Alaskans and propose billion-dollar taxes and PFD grabs to close our financial gap, I’ve made clear that this is out of line with the core beliefs of most Alaskans and the promises I made on the campaign trail.
And finally, our budget takes a sustainable, predictable and affordable approach. We must reset the spending clock and realign expenditures with the realities we face today. We must transform government at its core, right-size spending, eliminate duplication and prioritize programs to match our reality. Though we’ve been blessed financially in the past, we must establish a government that can weather the storm of low oil prices and save for the next generation of Alaskans.
As your governor, I will always be honest with you. I will treat the people’s money with the care and respect it deserves. As the details of my budget proposal are unveiled over the coming days, I ask all Alaskans to consider the alternative. Continuing down the path of oversized budgets, outsized spending and out-of-line priorities will only jeopardize the future of our state. For those demanding more spending, including those in the Legislature, we must respectfully insist: Where will the money come from? We must be honest with ourselves and align our spending with our revenues in order to bring about a brighter future for Alaskans.