Without specifics, Dunleavy budget is game of 'Let's pretend'
In his State of the State speech Tuesday, Gov. Mike Dunleavy promised to create a “real honest budget” that every Alaskan can understand.
He promised bigger dividends and big budget cuts, but he did not identify what he wants to cut and why.
As long as the difficult details are avoided, this is a harmless game of “Let’s pretend” that some legislators will play along with until the knives come out.
The most honest thing to say about the honest budget plan is that just about every unidentified cut will face heavy opposition in the Legislature—once the details are revealed—because he hasn’t laid the groundwork for any cuts in state or local government services, let alone $1.5 billion worth.
“We are now preparing a budget that for the first time all Alaskans will be able to understand and trust,” he said. “No more games, no more shuffling numbers, just an honest straightforward look at where we are.”
“As I promised the people, we must start from the standpoint that expenditures must equal revenues,” he said. “We can’t go on forever using savings to plug the gap.”
In his mind, the state has to match expenditures with oil revenues and investment returns from the Permanent Fund. There is no room for taxes.
So far the Dunleavy plan doesn’t add up. Many Alaskans won’t understand it or accept it and for good reason.
It makes no sense to base every decision on the current price of oil and to pretend that the state can operate and do all the great things Dunleavy promised without any taxes.
On Tuesday, he said the state has been “spending wildly beyond our means for years.” He and his aides are talking about cutting $1.5 billion or more from the budget.
But that’s not what he said during his campaign.
In September, he said that oil prices were high enough that the budget was close to being balanced and there was no need for drastic cuts. He mentioned a few ways to make government more efficient, but told Alaskans not to worry.
"Today it's at $74 a barrel,” he said of oil way back when, four months ago. “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.”
Don’t look now, but in today’s environment oil is about $63 a barrel and Dunleavy wants cuts that conservative Republicans didn’t have any enthusiasm for a year ago.
A $1 change in the price of oil over a year means about $80 million more or less in state income when oil is in the vicinity of $70 per barrel.
We’ve had many reminders over the years that it is foolish to look at the price of oil at any moment and conclude that it will hold for a week, a month or a year.
What we need to remember is that oil prices never hold and predictions are almost always wrong. We need to prepare for high prices, low prices and everything in between. The only pain-free plan is one in which oil prices never fall, a dangerous fantasy.
When oil prices rise, we spend more money and tell ourselves that proves we don’t need taxes. When oil prices drop, we panic and tell ourselves that proves we don’t need taxes. We need “right-sized government,” never settling on the dimensions.
The campaign is over and we need to see the dimensions Dunleavy has in mind.
Columnist and author Dermot Cole lives in Fairbanks. Write him at email@example.com