APDC President Letter, July 2018

2018JulyPresidentsLetter_Graphic1Even before the oil prices declined in 2015, the State of Alaska had been running a fiscal deficit, some years more than $3.5 billion. Legislative inaction to resolve the deficit drew down the State’s reserves by 83%.

With the State’s reserves nearly exhausted, the Alaska State Legislature recently took measures to reduce the budget deficit, passing Senate Bill 26 (SB26). This bill will initially transfer approximately $1.7 billion from the Permanent Fund earnings reserve to offset the State’s current $2.4 billion deficit; $1 billion will be set aside for the Permanent Fund Dividend. An addition $700 million will be transferred from the State’s already-depleted Reserve to balance this year’s budget deficit.

SB26 establishes a total annual transfer amount, but does not specifically address how the transfer will be split between the budget deficit and the Permanent Fund Dividend in following years. Once the Reserve has been exhausted, the Legislature will be forced to take the entire Permanent Fund Earnings, make additional cuts, and/or look for additional sources of revenue. There is more work to be done.

The State Legislature has reduced the General Fund expenditures from $7.6 billion in FY 2013 to $4.3 billion in FY 2018. State Operations were reduced 26%, while Capital infrastructure spending was reduced by 93%. Cutting capital funding not only crippled the Construction and Design industry, it also put the State’s investment in its public infrastructure – roads, bridges, airports, schools, office building, ferry systems, port facilities, etc. at risk. The American Society of Civil Engineers’ recent report card grade for the State’s infrastructure was a C minus. Without investing in our infrastructure the grade will only get worse.

A State primarily reliant on a single revenue source (oil) is no better off than a State that primarily makes cuts from a single line item (capital improvements). Alaskans deserve better representation.

SB26 is a start, but it does not close the fiscal deficit. Cuts alone are not going to solve Alaska’s fiscal problems. Additional revenue is needed to operate the government and to protect the State’s infrastructure.

As we start to look forward to the November election, please ask yourself what kind of Alaska you want for yourself and future generations. Speak out and vote accordingly.

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