March 08, 2017
Wednesday PM

My name is Rodney Dial and I am a Ketchikan Gateway Borough Assembly Member. This letter is my opinion and does not necessarily represent the views of other assembly members.

A few days ago I posted on Facebook how our local Representative Dan. Ortiz, was voting to increase State spending, at a time when the State budget has a multi-billion dollar deficit. Many of you asked me for the specifics….here they are:

1. Governor’s budget sent to the House and Senate (all funds and expenditures) $9,587,701,500 (nine billion, five hundred and eighty seven million).
   
   
2. HB57 (Operating Budget Bill) is currently in the House Finance Committee. Our Rep. Dan Ortiz is on this committee and is part of the house majority. Throughout the budget sub-committee process the House Majority passed dozens of amendments and increased the size of the operating budget by over $127,000,000 (million) to $9,714,838,500.
   
   
3. Rep. Dan Ortiz has now voted against over 200 proposals to reduce state spending just this session.

Ever wonder why we spend so much more on State Government in Alaska and what your PFD and income tax will be used for? (see HB115/Rep. Ortiz supports)

1. Operating Budget: Between 2004 and 2014 the state's operating budget increased 105% (inflation increased 30% during this time).

2. Per capita spending in Alaska: accounting for all types of spending, was $14,121.39 in FY 2017 (we are in FY18 planning); which was far above the national average of $5,777 in FY 2015 (most recent data available).

3. Budget for Alaska Department of Health and Social Services ($2.5 billion) –state spending on Medicaid, Medicare, public assistance (welfare) as well as other social programs.

4. Alaska Medicaid: In 2011, Alaska spent $9,474 per Medicaid enrollee, higher than any state and approaching twice the national average of $5,790. For FY17, The Legislature appropriated $1.7 billion. Excluding Federal funds, the state spent $700 million on 122,521 Alaska Medicaid enrollees for a total cost of $11,426 per person. For comparison, the amount the state gained by taking half of all Alaskans dividends last year, $667 million, which is not enough to pay for this one item (Medicaid) in the state budget.

a. State Medicaid enrollment increased 23.9% between FY06-15. In 2015 Governor Walker expanded Medicaid under the ACA, adding an additional 41,910 people to the program. Claims for the new group have amounted to $175 million so far (expansion paid by the federal government until January 1st of this year, now the state will have to pay a match which will continue to increase in the coming years). Expansion costs are currently $30 million over projections.

b. State Medicaid Spending increase between FY06-15 up 54.3%

c. State Medicaid costs for mental health services between FY06-15 $1.525 billion, and now over $159 million per year.

d. State Medicaid costs for dental services between FY06-15 $463.7 million, and now over $53.7 million per year. The federal government does not require the state to provide Dental services under Medicaid, however the state has elected to provide this service.

e. Medicaid costs for travel between FY06-15 $578.8 million, and now over $76.9 million per year. Treatments/tests including dental, not obtainable in rural Alaska, result in the SOA transporting the individual (and in many cases a family escort to accompany) to anyplace in the state or out of state deemed necessary. Travel, perdiem, lodging, and other expenses all covered.

f. Annual Medicaid spending in Alaska is projected to increase steadily (even with the recently passed Medicaid reform bill) to approximately $4.5 billion in just the next 13 years. If our population remains stable, the cost of this program would grow to over $6,164 per citizen.

g. State Medicaid reimbursement rates from the Federal Government are dropping by 10% over the next three years, costing the state tens of millions more annually (done by Obama/ACA).

5. Alaska is the only state in the nation that allows the private ownership of land in rural areas tax free. Most unincorporated areas of the state are tax free and do not pay property taxes to support education like the urban areas are required to do. All urban areas pay a state mandated Required Local Contribution (part of your property tax bill). In Ketchikan, the entire borough property tax goes towards education.

6. State Supplied Services. Roughly half of Alaskan Communities (all rural) have all essential services paid for “free” by the state and federal government. Citizens in these communities do not have to pay for education, public safety, most get free medical (Medicaid), free community buildings, roads, airports, have energy subsidized through a billion dollar state fund, pay no property taxes, water/wastewater subsidized or free, state paid internet in many locations, housing subsidized or free, and numerous other benefits and programs.

a. In addition to the state paying the entire cost of the service, the state frequently pays a premium, called an indirect, on top to “pay” the rural community to manage the free service. For example: The Village Public Safety Officer program (VPSO) that the state pays for local law enforcement in rural communities (in addition to trooper service) comes with a 25-28% bonus given to the local non-profit to administer. In the case of the VPSO program, the state pays the cost of the VPSO, pays to train, provides state employees to supervise daily, outfits the VPSO from state supply, etc., but still gives millions more on top. This would be the functional equivalent of the State paying the entire costs of the Ketchikan Police Department and then giving an extra 25% to the city “to manage”. This occurs with many state funded services in rural Alaska and costs the state tens of millions annually.

7. State Welfare: Citizens in 162 Alaskan Communities (all rural) can collect a monthly welfare check (officially called Temporary Assistance for Needy Families TANF) from the day they turn 18, until the day they die. No other US State does this. All other urban Alaskans and citizens in the lower 48, are limited to a maximum of 5 years of welfare in their lifetime (for more info see: The Personal Responsibility and Work Opportunity Reconciliation Act, signed by President Bill Clinton into law on August 22, 1996).

a. Average Alaska monthly welfare check for a family of four $1025, plus $102 for each additional child.

Items #3-7, are directly responsible for making Alaska the State with the highest percentage of citizens on welfare in the nation. Each year, thousands of individuals migrate from the lower 48 to rural Alaska to collect Alaska’s generous and unlimited welfare benefits. In the lower 48, citizens on welfare must make efforts to gain employment and/or obtain job training. Those that refuse are unable to collect benefits. There are virtually no work or training requirements in rural Alaska in order to collect benefits. Prime examples of the people coming to Alaska each year to take advantage of our lax welfare laws are “TV Show AK bush People, Papa Pilgrim, and others”.

The often repeated argument that the reason Alaska per capita spending is double the national average because we are a large state, is simply a “false narrative”. The undeniable reasons for our highest in the nation governmental costs are because so many of our rural communities pay nothing for their services, which then must be fully funded by the state.

Think for a moment the last time you visited a city in the lower 48 that had all their essential services paid by their state and paid no taxes… I challenge you to find one.

State officials like our own Rep. Dan Ortiz are claiming “we’ve cut to the bone” and that the state has reduced spending by billions. The truth is that many of the savings people like Ortiz claim are simply “budget deferrals”. For example, they claim the $667 million that the Governor took from everyone’s PFD last year as a reduction (I consider that a citizen reduction, not reducing governmental spending). They also claim that the $700 million in oil tax credits removed from last years budget as savings, when in truth… if you press them on the issue… they will tell you the credits were only deferred; we still must pay them and by next year the state will owe over a billion dollars in tax credits. The legislature can only change future credits, not those already earned… we still have to pay it.

In truth, most of the actual reductions have been to the capital budget. The capital budget is for items like schools, bridges, maintenance of governmental buildings, etc. Unless you think they waived a magic wand and eliminated the need, they simply pushed out spending for these items to the future (no real savings).

The only cuts that noticeably change the trajectory of state spending are cuts to the Operating Budget, and as mentioned above, Rep. Dan Ortiz’s caucus just voted to INCREASE that budget by $127 million.

They also want you to believe that thousands of state positions have been eliminated, but are carefully wording their talking points in a misleading manner. State employee counts are being manipulated in the following ways.

a. All state departments have “x” number of funded positions. All departments maintain a vacancy rate of varying percentages as a “pad” for their budget. Eliminating these VACANT positions on paper gives the appearance of “fewer state employees”, but does not necessarily translate into savings. On 3/8/17, it was mentioned in a House session that in many cases, the funding for the vacant positions was simply given back to the department (no savings). This is why the Governor refuses to provide info on the actual number of state employees who have been laid off (because very few have).

b. Last year the Governor instituted a hiring freeze. This has been done several times in Alaska history. It serves to “temporarily reduce” state employees, but is always reversed and requires no permanent reduction in actual employees after the freeze is lifted (most positions will be refilled).

c. They are also claiming a reduction for state employee positions they have transferred to local communities, non-profits, our outsourced to companies, but still pay for. Instead of paying a state employee to do “x” the state simply pays an entity to hire an employee to do “x”. This in many cases does not result in a savings, and can actually cost more (see VPSO comment above regarding indirect costs).

Special interests also want you to believe that cutting the size of government will cost more jobs and do more damage than pulling even more money out of the economy in taxes. The reality is that cutting government spending costs government jobs; raising taxes costs private sector jobs. Further, there is a state cost associated with raising taxes. The income tax bill (HB115) for example comes with a fiscal note stating that the department of revenue would need 60 new employees to start ($7.5 million and increasing), ramping up to 120 new state employees within three years of implementing this tax. Of course, with all these new employees comes new costs like buildings, vehicles, admin support, hardware/software, etc.

Ultimately, what is playing out behind the scenes is a propaganda campaign designed to scare you into protecting government by taxing yourself. Even with a PFD restructure and income tax, the deficit will still be about a billion, soon growing to billions for the reasons I mentioned above. The increases passed by Rep. Ortiz make this situation much worse. Most of the remaining state deficit will be pushed down to the urban communities, where they will be expected to increase local taxes to offset current state spending.

Residents of places like Ketchikan will be forced by the state to pay more…far more… in taxes so that other areas of the state can continue to pay nothing.

The only real option is to reduce spending to a sustainable level and require all Alaskans to contribute equally towards the cost of the services they receive. Half of Alaska cannot pay all the bills and it makes no difference if you believe it. We must have shared sacrifice to survive.

Prior to sending this letter I contacted Rep. Ortiz and gave him the opportunity to comment on my letter. Rep. Ortiz did not respond and is continuing to increase state spending and opposing all spending reductions. Send him an email and ask him for yourself dan.ortiz@akleg.gov

Rodney Dial
Ketchikan, Alaska

I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts. -Abraham Lincoln

Received March 08, 2017 - Published March 08, 2017

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