Alaska’s endless fiscal crisis: How’d we get here? (First of four parts.)

Editor’s note: Writer and former ADN opinion columnist Charles Wohlforth today kicks off a four-part series on the roots of our state’s fiscal predicament, going back to the early 1980s, when Alaska made big decisions that reverberate today. The series of opinion articles begins today in print and online, and continues the rest of the week at adn.com.

I signed the petition to recall Gov. Mike Dunleavy. But I don’t think he is the ultimate cause of the economic and social disintegration pulling apart our state.

Certainly, Dunleavy demonstrated incompetence, issuing devastating budget vetoes and then reversing half of them seven weeks later, after programs had closed and former employees had moved on. That was a senseless waste.

Now he owns the problems he inherited — problems of homelessness, mental health care, education, and so on — because he thoughtlessly damaged the institutions struggling to solve these crises.

But he is not the ultimate cause.

Dunleavy entered this drama only in the final act. Alaskans wrote the script themselves long ago, before Dunleavy ever set foot here. Back when he was only a boy.

At the dawn of the oil era, Alaska created a system for free-of-charge government with free-money handouts. When the oil wealth gave out, and the bills came due, we had the resources to transition to a healthy state and economy. But we chose not to.

Over a four-year debate, from 2015 until last year, through legislative special sessions and elections, we narrowed our options to those that assure a bleak future. In a state with a profitable oil industry and no broad-based taxes, the only choice remaining on the table this year was to live on the money still coming in from oil and investments — to cut services or dividends.

[Part 2: The top of the waterfall, 1980: Tracing the roots of Alaska’s fiscal predicament]

[Part 3: How the Permanent Fund dividend became the primary purpose of the Permanent Fund]

When you talk to people Outside, it takes a while to explain all this. When they finally understand, their usual reaction is contempt. Regardless of how divided voters are elsewhere in the country, citizens still recognize their responsibility to pitch in, on some level, for the services they need.

We, instead, became a people who expect government to be free and its benefits to be individual rather than shared. The question I want to explore over the four parts of this series is, how did that happen? In 40 years, what became of the Alaska spirit of self-reliance, optimism and community?

As an opinion columnist for the Anchorage Daily News, a job I left in January, I explored many aspects of these questions. The answers are not simple and I don’t want to suggest just one thing happened.

But when it comes to how we relate to government — and to one another as citizens — a few critical decisions stand out. Alaskans made those decisions just under 40 years ago. When the money began rolling in, we abolished taxes and began sending out checks that quickly became an entitlement. The state put every citizen on welfare.

Today, affluent Alaskans say — and I believe many of them — that they would willingly pay income taxes if they knew the money was needed. But they refuse to be taxed so the state can hand out dividends paying for Hawaiian vacations and ATVs.

Dividend hawks point to the benefit of income equality, as the dividend supports the poor. But that money would have been of more use to low-income Alaskans if we spent it on pre-K and the University of Alaska, shelters and housing, health care and substance abuse treatment — and the many other supports that allow disadvantaged people to move up rather than live on handouts.

The oil industry seemed to get off unscathed, with Republicans unwilling to touch taxes put in place by an industry-controlled Legislature. But oil executives don’t like living in towns without art or quality schools, and with junkies and mentally ill adults on every street corner.

People with opportunities are leaving. BP and Nordstrom may have other reasons to go, but their departures are powerful symbols of Alaska’s increasingly provincial personality.

Most of today’s Alaskans can’t remember when we had exceptionally clean and effective state government. Alaska has become famous for corruption. Oil provinces often end up that way. It’s a well-studied part of the resource curse, when big, extractive industries hold too much of the economic power in a region and capture the political power as well.

But we can’t blame it all on the oil companies. They had help. When Alaska politicians went bad, Alaskans recycled them into new positions of power.

Democracy works when citizens care how their money is spent. It goes like this: We elect people who share our values, they make expenditures we feel are legitimate, and we pay our taxes to fund those expenditures. A corrupt politician is a thief subject to punishment by the law and the voters.

In Alaska, after 1981, that isn’t how it worked. Here, the government was a system for splitting up money that no one had earned. We elected people to get our share of the loot. If they stole some of it, that didn’t seem to matter if they brought home the bacon.

Now we’re a couple of generations down the line with this system and changing back to the normal way of governing a state has proved impossible. Legislators who tried got kicked out of office, along with Gov. Bill Walker.

He had solved most of the fiscal crisis with a plan based on reasonable cuts, a smaller dividend and future taxes. Dunleavy — powered by voter indignation over smaller dividends — won the election by promising to maximize the giveaway and impose no taxes. His pledge could be fulfilled only one way, by dismantling the state. That should have been clear to anyone paying attention.

Perhaps the shock of a recall and a few more years of recession will be enough to reset Alaskans’ expectations and remind us that we do need a government like all the other states, one that serves as more than a feeding trough.

If we build that kind of state, I think we’ll discover that, in retrospect, the riches of the oil era did not create enduring prosperity. As our population grew and our oil money shrank, the pie always got cut thinner. We didn’t invest in ourselves. Despite our blessings, we more often felt poor rather than rich.

And with that came another kind of poverty, a poverty of spirit.

That’s what I expect we’ll see. What has amazed me in learning about our past is that some people saw it coming 40 years ago. And they tried to avoid it.

This series tells the story of that fight.

In Part 2: The Top of the Waterfall, 1980, Wohlforth tells the story of Alaska’s 1970s fight for its future, which culminated in legislation for a very different fiscal system. Read the piece here.

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