What’s the problem?
After years of struggling to balance the needs and wants of Alaskans due to a collapse in oil price and thereby revenues, our state is once again flushed with cash. As we return to a high revenue year we are reminded that at the structural level, Alaska does not have a revenue problem, we have a spending problem.
If Alaska did not have revenues from oil taxation or an investment fund to draw on to fund State Services there is no feasible way our State could raise the revenues needed by implementing the largest broad based Income and Sales tax regimen in the nation to cover our current spending levels. Simply put, our State lives beyond its means. Many of our elected leaders have been kicking the can down the road when it comes to implementing a Long Term Fiscal Plan, opting instead to balance the budget by rapidly draining the state's savings accounts. (SBR/CBR) This has now gotten to a point where there is not enough in our state savings to accommodate the bureaucracy. To compound this problem, oil revenues without large increases to TAPS throughput have been shown to be insufficient as a stable revenue source.
With massive inflationary pressures, skyrocketing gas prices, electric rates, supply chain issues, and critical shortages in our workforce we face very difficult challenges in the interior. I believe leaders should articulate sensible solutions to these complex problems.
What do we do about it?
I believe in government but not bloated government. Therefore, I believe we can address the problem with the following:
We need to reduce operational spending and develop our bureaucracies to operate more efficiently. The time for throwing money at problems without tangible and measurable results is at an end. We will find ways for our state programs and organizations to operate within their means. However, we also need to understand that this can be done without simply gutting workforce numbers or destroying valuable institutions to our community that act as economic drivers, like the University of Alaska Fairbanks.
The State of Alaska needs a viable spending cap that is ideally indexed to the private sector GDP or similar useful metric. History has shown that our State Government’s insatiable appetite to spend every last dollar it takes in is unsustainable. I believe the only way to alleviate this problem is to apply fundamental control mechanisms that will require elected leaders to focus on investment that is geared toward facilitating the growth and diversification of the private sector economy.
We need to diversify and expand our resource development responsibly. Relying on one resource as a primary source of revenue has shown us that there are good times and there are bad times as the market operates. Yet, saying that “that’s just how the market works”, or “We’ll just wait on oil prices to bounce back,” are not good responses for the families who can’t afford their basic necessities. Including the development of alternative energy resources while expanding our exploration in oil and mining opportunities throughout our vast state can help stabilize our revenue streams in the long-term.
Finally, we need to ensure that the permanent fund is protected for future generations of Alaskans. The generation that forged statehood wisely enabled future Alaskans to prosper and benefit from the fund and its dividends. Protecting the dividend means ensuring the long term viability of the fund itself.