Brennan: Some interesting years ahead

By Tom Brennan |

When I started work at The Voice of The Times in the year 2000 the price of crude oil was something less than 20 bucks.

At that time we had a pretty nice state government, one that provided most – if not close to all – the services that a state government should provide.

Certainly there were things that could be added or expanded, but the people of this state got along just fine with what we had. And, of course, there were many legislators with ideas on how to spend more money if they could get it. We ran a deficit, which was paid for by drawing down money socked away for that purpose by the Alaska Permanent Fund board of directors.

Our state legislators were naturally in a flap about the money shortage, but most of us just enjoyed the state services we had with the money on hand and went about our business. We paid neither income nor sales taxes, so the cost of government wasn’t coming out of our pockets. But many legislators were hearing from their constituents about pet projects that they wanted funded.

And guess what happened? For a variety of reasons over which Alaskans had no control, the price of crude oil shot through the roof. By  2010 Alaska crude was selling for something like $160 a barrel. (I’ve always said that when oil is selling for prices like that you don’t burn it, you just dab a little behind your ears before you go out for the evening.)

Those high crude prices, of course, meant a flood of royalty and tax dollars into the state treasury and many, many pet projects got funded and became a permanent part of the state’s annual program.

Over the years the state budget ballooned and for the last fiscal year reached $4.4 billion — with a deficit of $2.8 billion. The difference was made up by dipping once again into the earnings of the Permanent Fund. Oil is still selling for around $60 but we are producing much less of it that we were in the old days. Throughput in the trans-Alaska oil pipeline was once over 2 million barrels a day but is now around 500,000 barrels, so the state’s cash flow is considerably reduced from past years.

The prospects for the coming year seem somewhat similar, though with Gov. Mike Dunleavy in the governor’s office we are almost certain to be doing things rather differently in the next few years.

Gov. Bill Walker made some attempts to reduce government costs, but his efforts were often along the lines of the decision to cut money for the Alaska state trooper based in Talkeetna. Our law enforcement people fought long and hard to get that trooper position established. It makes a real difference if a law enforcement officer lives among the people of a community. And without one, hundreds of square miles of our state can only be protected by officers who must fly or drive in from distant posts. Those are miles in which communities are small but very real to the people who live there.

I’m no fan of an income tax, or for that matter of a sales tax, but it seems almost certain that we the citizens of Alaska will eventually have to pay a portion of the cost of state government.

That burden will likely be offset in great part by individual dividends paid from the Permanent Fund. It’s unlikely that will change. The longer we can hold off on levying such taxes the better – and savings should carry us for a while – but rest assured that the day will come when you and I will have to pay the piper.

In the meantime, Governor Dunleavy is determined to right-size government and make good on the Permanent Fund dividends shorted us over the last few years by Gov. Bill Walker and the Legislature. That right-sizing of government will be an interesting process to watch. Dunleavy has assembled a team that should be able to do it if such a thing can be done.

Government budgeting will be put to some vigorous tests and we are likely to find out just what it should really cost to run our state government. These things won’t happen all at once, and the Dunleavy administration may find that right-sizing government is a very difficult chore.

But it’s time to make a good run at it.

 

One Response to Brennan: Some interesting years ahead

  1. R-Dubya January 13, 2019 at 7:03 pm

    MAYBE(???) …. Before strapping the citizens with some sort of ‘uncontrollable’ Income Tax and/or Sales Tax (so eloquently explained to us common folks as a necessary – required path forward to save us from utter disaster) our elected leaders will have sufficient Insight – Courage – Fortitude to take necessary measures to “Right-Size” the State Government with the mindset and approach so as to identify ‘OBVIOUS’ waste and maximize efficiencies by ‘ELIMINATING’ any-and-all programs and services deemed ‘wasteful’ and ‘unnecessary’.
    ACTUALLY(!!!), this dilemma would be quite easy to solve by merely cutting the budget of HHS (what exactly does this this department do to command the largest budget item within the State Budget and why do we accept it as being of value and/or beneficial?) and Education (this department is pitiful and should be completely ashamed of the results it produces given the resources it receives!!!) in HALF (i.e. – a reduction of 50%). Then, cut all other budgets by 25% … EXCEPT for the Department of Transportation & Public Safety.

    Reply

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