Dunleavy's avalanche of imaginary numbers will never fix Alaska finances
Listen closely to former Sen. Mike Dunleavy as he speaks with conviction about the state budget and oil prices. He rattles off numbers like a desperate timeshare salesman, which makes it hard to tell which statistics are real and which are imaginary.
In a panel discussion Thursday in Juneau, he used more of the latter than the former. This is the hallmark of any Dunleavy discourse on the budget. He speaks about hundreds of millions here and billions there as if the numbers had some weight to them.
In 2016, he said a long-term sustainable operating budget would be $4.5 billion. In 2017, he said the target should be $3.2 billion. A month ago, he said it would be $4.3 billion. On Tuesday he said it would be $4.1 billion. On Thursday, he said it would be $4 billion.
He is playing pick-a-number budget bingo with Alaska and assuming that no one checks his figures. The state operating budget this year is $4.6 billion, down from $5.4 billion in 2015. Those numbers don't include the $1 billion spent on dividends in 2015 and the similar amount to be distributed this year.
Gov. Bill Walker questioned Dunleavy about the former senator's big announcement in early 2017 that the "path to fiscal sustainability" required a $1.1 billion budget cut over four years. Dunleavy got lots of publicity for his bold plan, but even fellow Republicans in the Senate knew it made no sense as a long-term target.
On Jan. 12, 2017, Dunleavy said the state should cut the operating budget to $3.2 billion by 2021 and keep it there until 2027, with no increases for inflation. The state could live on savings and the Permanent Fund Dividend would be safe.
"Taxing Alaskans, and/or taking the PFD to cover the large fiscal gap is not necessary," said Dunleavy, a career government employee who has collected a state pension for many years.
He refused to identify any programs and services he would cut to save $1.1 billion. Cuts of that magnitude would either require closing most of the schools in Alaska or shutting down the University of Alaska, the Department of Transportation and a few smaller agencies, and eliminating 15,000 jobs.
Dunleavy had no idea then or now of how to cut $1.1 billion. And when Walker asked him Thursday what he would cut, Dunleavy tried the rope-a-dope.
"That was when oil was at $26 a barrel governor," Dunleavy said to Walker.
"Today it's at $74 a barrel. You don't need to cut a billion dollars today, in today's environment. What we need to do is make sure that we get the budget down somewhere in the neighborhood of $4 billion and then that, if we do that, we could sustain a budget growing at about $70, $80 million a year. At $26 a barrel, your proposals of taxes would have destroyed the economy in the state of Alaska."
Dunleavy was wrong on oil prices and wrong on the budget. "The price of oil in January 2017 was not $26. It was nowhere near that," Walker said. He said he would keep asking Dunleavy the same question about the $1.1 billion in cuts at every forum.
Walker is right. The price of oil on Jan. 12, 2017 was $55, more than double what Dunleavy claimed. And the backup material that Dunleavy provided with his budget plan said it was not based on $26 oil, but on the 2016 Revenue Forecast, which predicted $54 oil in 2018, rising to $60 next year.
Oil sold for $26 a barrel in January 2016, back when Dunleavy said the long-term sustainable target was more than $1 billion higher than the sustainable target he picked in 2017.
Oil prices started to collapse four years ago, while candidate Walker and everyone else were still saying there was no need for an income tax, a cut in the PFD or any other unpopular measures.
Walker's critics like to remind him of his October 2014 statement that, "I have no intention to implement a statewide tax or paying for state government by reducing Permanent Fund dividend checks. If we properly develop our natural resources and put in place a sustainable budget that should not be necessary."
Candidates for governor, usually Republicans, but many Democrats as well, have trotted out the simplistic claim that resource development will fix all of our problems. That alleged path to sustainability is well trodden by politicians. But once elected, they see that development doesn't work the way they promised on their TV ads.
But it sounds good, so candidates keep repeating the same nonsense. Dunleavy, who quit the Legislature to run for governor, didn't get this lesson during his time in office. He is still saying that resource development will fix all of our problems and there is no need to do anything unpopular.
I credit Walker for learning on the job. He came up with a solid start toward a balanced fiscal plan and tried to break Alaska from the old habit of depending entirely on the whims of the world oil market.
The tax proposals offered by Walker, all of them stopped by Dunleavy and other Republicans in the Senate, would have moved Alaska closer to a real sustainable budget. Imaginary numbers don't cut it.