What we’ve learned from this year’s budget debacle

The process of arriving at a spending plan for Alaska may never have been so contentious or prolonged as it was this year. Disagreement over fundamental questions about state government and the services it provides fueled a back-and-forth battle between Gov. Mike Dunleavy and the Legislature. The chaos damaged the state and plunged Alaskans into uncertainty about what the state would fund, with thousands of jobs and services affecting hundreds of thousands of Alaskans in the balance. After all of the furor, what have we learned? Here are a few lessons from the 2019 legislative sessions.

1. Alaska’s budget has to shrink.

There was near-universal acknowledgment this year among Alaska’s elected leaders that voters wanted them to pare down the budget. A budget-balancing plan based on cuts was a key plank of Gov. Dunleavy’s platform, and legislators on all sides worked during their regular session and the two special sessions that followed to pare down the budget where possible. Even Democrats who are usually reluctant to lower spending agreed that cutting the budget had to be a part of the solution. Despite that acknowledgment, there was strong discord between the Legislature’s majority caucuses and the governor about how far and how fast the cuts should be. By attempting unprecedented cuts in a single year, Gov. Dunleavy overplayed his hand, and the past week saw him moderate those plans, bringing them more in line with Alaskans’ expectations.

2. The governor didn’t have the mandate he thought he had.

The governor’s proposed budget, announced Feb. 13, shocked the state, with some dubbing it the “Valentine’s Day Massacre.” With hundreds of millions of dollars in cuts to core state services and cost-shifts from the state to municipalities, the budget managed to strike at many of the parts of state government Alaskans valued most. There was an incredible volume of broad public outcry against the plan, even from core constituencies that supported the governor’s election. Public comment to legislators and letters to the editor poured in opposing the cuts, especially after the governor issued an unprecedented $444 million in vetoes to the legislators’ operating budget. Many Alaskans expressed willingness to have their Permanent Fund dividends reduced or other revenue measures implemented rather than see the vetoed services disappear. That was bad news for Gov. Dunleavy, who was counting on Alaskans supporting his push for a “full” dividend under the original 1982 formula.

3. Costs and services are shifting from the state to municipalities.

The budget cuts the governor made ended numerous programs that assisted local governments financially. For instance, the state has ended the practices of municipal revenue sharing and school bond debt reimbursement, eliminating state money that formerly bolstered city and borough budgets. And Gov. Dunleavy’s vetoes of funds for homeless services has left communities with the choice of paying to provide those services themselves or seeing more residents on the streets.

The result: Municipalities will be picking up the tab on more of the services that Alaskans want, resulting in likely property tax increases for residents. That’s a canny move by state lawmakers, as it keeps them from making potentially unpopular decisions about statewide taxes. But municipalities are constrained by their tax caps, so there will still be difficult discussions about the services we want and taxes to pay for them — those conversations will just take place at the city and borough level, where individual communities can prioritize and fund the programs they value.

4. The PFD isn’t the ‘third rail’ of Alaska politics anymore.

For decades, the conventional wisdom of Alaska politics has been that any attempt to tinker with the PFD formula or reduce the amount of the dividend would result in swift ouster from office. But there were hints that the winds were changing last year, when Senate Bill 26 allowed the Legislature to access the Permanent Fund’s Earnings Reserve to pay for both government services and the dividend. When the fall elections rolled around, some legislators who supported SB 26 lost their seats — but most did not. And when push came to shove on the state operating budget, many residents went on the record supporting a reduced PFD, or even no PFD at all, to ensure the state could continue to provide some services. Just a few years ago, when then-Gov. Bill Walker was hosting meetings around the state seeking to drum up support for changes to the PFD formula, public willingness to entertain the issue was far less widespread.

5. Alaska’s biggest ideological differences aren’t reflected by party identification.

Political parties have always been a poor measure of where people stand in Alaska — there are plenty of Democrats who support oil drilling in the Arctic National Wildlife Refuge, and most of the Legislature’s Republicans are in favor of subsidies to help equalize power costs across the state. But this year put the real differences in ideology into stark relief, and the deepest divides cut through political parties and even traditional alliances. The Republican Party had enough members to control both chambers of the Legislature, but couldn’t muster singlehanded control of the House. Its Senate majority fractured on the issues of the budget and the PFD. Some Democrats stood in favor of Gov. Dunleavy’s call for a “full” PFD, while others led the charge for reductions to the dividend to pay for services.

And when the effort to recall Gov. Dunleavy began, its sponsors were a Democratic Party mainstay who is the sole surviving delegate from the Alaska Constitutional Convention, a former Republican legislator and gubernatorial candidate, and the patriarch of an Interior coal-mining dynasty. More than ever, Alaska’s political landscape defies easy labels.

The single greatest takeaway from Alaska politics this year, however, is the silver lining behind all of the dysfunction and wrangling in Juneau: Alaskans are engaged in the political process and the specific services provided by the state like never before. Every day, legislators and newspapers across the state receive scores of letters and phone calls from Alaskans who are voicing their opinions about the budget for the first time. That engagement, though caused by a train wreck of a budget process, is a good thing. It has already had significant impact on legislators weighing support for different budget priorities, and it will continue to inform policymakers at all levels as they look to craft solutions in line with most Alaskans’ vision for our state. The more people who speak up, the better Alaska’s government will reflect the will of its people.