Walker renews call for budget reforms: 'Denial doesn't make the problem go away'

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Gov. Bill Walker is escorted into the House floor by Rep. Dean Westlake, left, and Sen. Tom Begich. Gov. Bill Walker gave his State of the State address to a joint session of Alaska’s House of Representatives and Senate at the State Capitol in Juneau on January 18, 2017. (Marc Lester / Alaska Dispatch News)

JUNEAU — Alaska Gov. Bill Walker made a renewed call for state budget reforms to a new Legislature in his annual State of the State speech Wednesday night, telling lawmakers that "denial doesn't make the problem go away."

Walker's speech, delivered at the start of his third year in office, came after two years of discord and gridlock in Juneau, with state savings dwindling as lawmakers largely dismissed his deficit-reduction plans and failed to make much of a dent in the deficit.

With 15 new legislators in Juneau, Walker, a Republican-turned-independent, pitched a stripped-down version of his budget package from last year and left room for adaptation — all while ratcheting up his rhetoric.

In last year's speech, Walker referred to Alaska's "cash flow problem." Now, he says the state is in a full-blown "crisis" — a word he'd previously avoided, but used seven times Wednesday night.

"Hope doesn't pay the bills," said Walker, dressed in a plain white shirt, jacket and red striped tie. "We need to pass a plan to stabilize our fiscal future. And we need to do it now."

[Alaska lawmakers begin 2017 session cheerfully, but rifts lurk below the surface]

[Read the governor's speech.]

Walker, an oil and gas attorney, was elected in 2014 after campaigning on his ideas to spur construction of a long-sought natural gas pipeline from the North Slope.

But he's been spending much of his political capital on the state's budget problem instead, and barely mentioned the state's pipeline plans Wednesday other than a few pledges: The project won't require any new money this year, and it won't be pursued "at all costs," or with cash from the Permanent Fund, Walker said.

Instead, the governor's focus was largely on the budget.

Pre-empting criticism from conservatives that he hasn't cut Alaska's spending deeply enough, Walker, in his 45-minute address, ticked through some of the reductions that he and lawmakers put in place over the past two years — slicing agency spending by 13 percent.

The state is selling ferries and search and rescue aircraft, Walker said. It's closed seven troopers posts and a prison in the Mat-Su, and the state workforce has dropped by 3,000, to 24,000.

Walker is also proposing legislation this year to freeze the salaries of some state employees. But those proposals alone won't come close to eliminating Alaska's $3 billion deficit.

The state's budget, which has long been balanced with oil taxes and royalties, has been hammered by the two-year slump in prices and now uses savings to pay 70 cents of each dollar spent.

A recent, modest recovery in oil prices offers a dose of good news, Walker said. But current prices of roughly $50 a barrel would still need to double to solve the state's budget problem, he added, or the flow of oil in the trans-Alaska oil pipeline would have to triple.

"Neither is expected any time soon," he said.

Last year, House lawmakers from both parties balked at Walker's plan to raise new revenue by restructuring the Permanent Fund — a proposal that could slice the deficit by more than half, but also reduce Alaskans' annual dividend checks.

Republicans also rejected Walker's proposed taxes, including one on personal income. He urged lawmakers Wednesday to substitute their own proposals if they don't like his.

"If you believe we need to cut more, identify your cuts and put them on the table. If you think the solution is a different kind of tax than I have proposed, put your tax proposal on the table," Walker said. "Whatever your plan may be, put it out there, and let's get to work on the solution."

Walker balanced his dire description of Alaska's finances by touting elements of the state's economy, as well as his accomplishments — and those of the Legislature — over the past year.

[The Alaska Legislature returns with a new House majority, but it faces the same old budget problem]

He also unveiled a new initiative to tackle Alaska's opioid epidemic. Deaths in the state from heroin overdoses shot up to 36 in 2015, up from single digits just a few years before, with prescription opioid overdose deaths also on the rise.

Walker's new initiative has five parts: limiting the amount of opioids doctors can prescribe; strengthening a prescription drug monitoring program; improved screening and enforcement to stop drugs from getting to rural areas; required addiction education for medical workers; and adding regulatory flexibility to restrict new types of opioids as they emerge.

Walker's communications director, Grace Jang, said the proposals would be pulled together into a bill that would be introduced later this year.

Kim Whitaker, a recovery advocate in Anchorage who has a daughter addicted to heroin, said the proposals were "great, great news" — particularly the piece to strengthen prescription drug monitoring.

Addicts, she said, can get one prescription, and "then they can go down the street or across the city or to another town in the same state and do the same thing."

"There's got to be a way of having a database that can stop people from doctor shopping," she said in a phone interview.

Lawmakers offered mixed assessments of the full speech. Members of the House's majority coalition, made up of Democrats and a few moderate Republicans who are generally aligned with Walker's budget proposals, were enthusiastic.

Anchorage Democratic Rep. Andy Josephson cited a section of the speech in which Walker asked the state's elected officials to act like police officers who run toward problems.

"I thought it was very inspiring, and moving," Josephson said. "He's providing leadership and asking us to follow."

At least one Republican who last year opposed Walker's budget reforms didn't seem to have been swayed Wednesday.

"Maybe we should just wait for a new governor if we have to have new revenue streams," said Big Lake Republican Rep. Mark Neuman, a member of the House's GOP minority.

Neuman rejected Walker's use of the term "crisis," noting that the state still has close to $10 billion in the Permanent Fund's earnings reserve account — the one used to pay residents' dividends.

"This is not an emergency," he said.

Eagle River Republican Sen. Anna MacKinnon, a member of the Senate's GOP leadership, said she agreed with Walker's general theme.

"I think that everyone wants to solve the fiscal foundation for Alaska," she said. "We have a problem; we need to address it."

Something needs to change, MacKinnon said. But each person would solve the state's budget problem differently, she added.

"The devil is in the details," she said.