Dunleavy claims $1.8 billion deficit is fine, but bumping that to $1.9 billion for education is irresponsible

Gov. Mike Dunleavy praises the financial savvy of the Republican legislators who blocked a plan to increase education spending by $253 million a year, then he praises himself for proposing an increase of $180 million a year.

Left unsaid in this praise-a-thon is that Dunleavy is proposing a $1.8 billion deficit for the fiscal year that begins July 1.

Dunleavy claims the education increase he vetoed was unsustainable because the total deficit would be $1.9 billion with that extra school funding, instead of the $1.8 billion deficit he has proposed.

The obvious answer here is to enact taxes to create stable sources of revenue. And to limit the size of the dividend.

Former Republican legislator Andy Warwick, a retired CPA who served in the Hammond administration, says we need an income tax and we need to tie the dividend to income levels. Those are reasonable ideas he put forward in this column. He’s not exaggerating when he says, “Our state is dying a slow death, and the current fiscal plan is undeniably not working.”

The current fiscal plan is no fiscal plan.

Dunleavy and many other politicians are hiding behind a confusing blizzard of numbers in which the obvious answers are concealed from the public.

The brainwashing has been a constant during the Dunleavy years—in 2018 and 2022 he said we could have giant dividends, no taxes and no cuts in services that anyone would notice.

The Dunleavy deficit and his failure to do anything about it went unmentioned in all of the news coverage of the legislative failure to override the Dunleavy education veto.

Dunleavy claimed that the Republicans who blocked the $253 million for education, which would have meant a $1,000 increase in the Base Student Allocation, showed “a clear understanding of our fiscal situation,” but there is no evidence that they have an understanding of our fiscal situation.

Dunleavy claimed his smaller education increases, which would cost about $180 million, will “align with the state’s fiscal reality,” but there is no evidence he is aligned with the state’s fiscal reality.

He’s saying a $1.8 billion deficit is aligned with the state’s fiscal reality, but $1.9 billion is not. That’s the story that needs to be told.

Here is the coverage by Alaska Public Media of the education veto.

Here is the Anchorage Daily news story.

Here is the Alaska Beacon story.

The state budget process in recent years has followed a consistent pattern under Dunleavy.

“The governor proposes a budget with a substantial deficit, then the legislature has reduced the Permanent Fund Dividend (PFD) amount proposed by the governor, increased the budget for other items, and passed a budget that does not rely on drawing from the Constitutional Budget Reserve,” the nonpartisan Legislative Finance Division said in its overview of the governor’s budget.

“The result is that the PFD appropriation and the capital budget have fluctuated along with oil prices, acting as a shock absorber outside of the operating budget rather than reflecting a structured long-term plan,” the division said.

There is a structural budget deficit. There is no plan.

What the division won’t say is that this is how Dunleavy avoids taking any responsibility.

He introduces a fantasy budget with a phony dividend and then does nothing but whine in the months that follow. He forces the Legislature to cut the dividend, knowing that is easier than raising taxes.

Then he blames the Legislature for cutting the dividend and casts himself as an innocent bystander who wanted to pay giant dividends.

Dunleavy is on the same track this year, proposing a $1.8 billion deficit and $2.5 billion in dividends. He won’t propose cutting the dividend and he won’t propose taxes. He is proposing that the Constitutional Budget Reserve will be empty in 2027.

But by then he’ll be gone.

The Legislature finds it hard to enact taxes, the obvious answer, because it has a large contingent of legislators who bluffed their way into office by treating taxes as a forbidden topic.

The news coverage of the state Legislature needs to reveal the underlying hocus-pocus.

Some Republican legislators want to eliminate the dividend, but won’t say that above a whisper. They will shout, however, when Dunleavy’s pretend dividend is cut in half.

Meanwhile, as of now, there are no additional hearings set on Senate Bill 92, which would close the Hilcorp loophole. The bill is languishing in the Senate Finance Committee.

There are no additional hearings set on Senate Bill 112, which would cut oil tax credits by $3. The bill is languishing in the Senate Resources Committee.

Those two bills would be a start toward erasing the Dunleavy deficit.

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