A Note From Governor Walker on the State of Alaska

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Fellow Alaskan -

After years of dialogue, the discussion over how to solve Alaska’s budget crisis has begun to narrow.

To reduce the deficit, the Legislature and Administration started by cutting general fund spending by 40%. We then worked across party lines to pass HB 111, ending an unsustainable system that paid millions in cash credits to small oil exploration companies.

Despite those actions, Alaska’s deficit spending has drained $14 billion, nearly all of our savings. In order to preserve essential services we all rely on — troopers and prosecutors; airports, ferries, and roads; education; fisheries management and project permitting — a compromise must be struck this year. The primary vehicle for that compromise is a portion of the earnings from Alaska’s Permanent Fund, which holds $64 billion.

The House and Senate have already agreed that utilizing the fund is necessary to eliminate a significant portion of the deficit. However, there remain honest disagreements between two groups: Those who believe a restructure of the Permanent Fund, alone, is enough; and those who believe that other forms of revenue are also necessary to prevent the remaining deficit from endangering essential state services or the Dividend program itself.

If we’re going to use Permanent Fund earnings to pay for government and dividends, we must do it as responsibly as possible. The only solution my Administration will support is one that satisfies two simple, but mandatory, criteria.

First, any use of earnings cannot be allowed to endanger the long-term health of the Permanent Fund. The yearly draw must be set at a fixed percentage that will allow the fund to grow over time and never endanger the corpus. Because the Fund will now be paying for Dividends and some government services there will be a yearly temptation to “overdraw” the Fund by spending an unsustainable amount. An overdraw will always be politically easier than further cuts or passage of new revenue. However, because such actions would jeopardize the long-term health of the Fund, a ceiling on the draw must be binding in law.

Second, any plan to utilize a portion of the Fund earnings must also guarantee payment of meaningful dividend checks to Alaskans for generations to come. Every year the Dividend lifts thousands of Alaskans out of poverty, and it is necessary to the survival of many rural and working-class families. With a ceiling on the draw as described above, the Legislature will have a predictable, but limited, amount of yearly funding. Neither the need for government services nor an aversion to taxes can be allowed to eliminate future funding for the Dividend. Accordingly, an unbreakable floor beneath the Dividend amount must also be established so the program will survive in perpetuity. This floor could be meaningfully set near the historical average and still require robust growth in payments over time.

In the eyes of my Administration, both of these criteria are critical. I will continue to work with the Legislature toward a compromise. The time for political posturing and paper tiger solutions is over.

I remain optimistic. Collectively, we have already made some of the hardest decisions. There is reason for hope, and we are closer to a solution than we’ve ever been before. -Signed Governor Bill Walker