June 29, 2019
Saturday AM

So the Governor has announced his vetoes, cutting $444 million from the budget. Assuming these cuts stand, just about everyone will feel some pain, and it will have an impact on local taxes.

Let’s consider for a moment why these cuts were made. First, if you want someone to blame for this you should start with the legislators who have had nearly 6 YEARS to address this problem and failed to do so.

If you are one of the few that believe that TOTAL State spending has been reduced by any REAL amount then they have successfully mislead you. I worked in the legislature for a decade and I have watched them pull the following tricks over the last several years.

1. Consistently compare the current budget (for each of the last several years) against the FY15 budget, to show how much they have “Cut”. Want to know why? Because that was the year former Gov. Parnell “Paid Off” $3 billion in State retirement liability. He didn’t increase the cost to operate government; he paid down a multi-billion dollar debt. But it makes the budget larger for that year. By doing so he SAVED over $500 million annually in state pension payments. Meaning, that they falsely imply that government spending was far greater then, while ignoring that had Parnell not taken this action our budget situation would be far worse now. (Difference 3 billion)
   
   
2. Most of what the legislature is calling cuts are simply spending deferrals. The main ones being the Capital budget and the oil tax credits. Unless you believe that most capital projects are non-essential, then the money will be expended at some point. They just pushed off spending to future years to give the appearance of cuts and we all know the capital budget will increase again. Regarding the oil tax credits, Gov. Walker vetoed about 1 billion in credits that must be paid. This is the functional equivalent of deciding not to pay your credit card. Still has to be paid, and is NOT a cut, although they called it one. (Difference hundreds of millions annually for Capital budget / about $1 Billion for oil tax credits).
   
   
3. Another trick is when the legislature under funds departments and calls it a cut, knowing they will simply make up the difference the following session. A recent example is when the Democratic house majority, in the FY18 budget under funded Medicaid and other departments to make it appear as a cut. They simply passed a supplemental budget the following legislative session for nearly $100 million extra, but of course that amount wasn’t included in the FY18 budget total. ($114 million request for FY18). Last Fall as Gov. Walker left office he put forward his supplemental budget, requesting ANOTHER $178 million in spending to cover other under funded departments.
   
   
4. The legislature moves spending between accounts e.g. UGF to DGF to appear that spending is reduced. (varies)
   
   
5. The legislature depleted reserve accounts to make it appear that spending was reduced. They did this with the AMHS reserve fund that contained millions used as a cushion for the system to deal with variations in fuel prices, repairs, etc. Once again, not a cut, just the appearance of one by depleting reserves. (Tens of millions)

These are just a few of the smoke and mirror gimmicks employed to make you think they made major spending reductions.

In truth, some things were cut, and some things were increased, but most of what they claim as cuts are simply budget deferrals and reductions to the projected increases.

Last year… an election year… TOTAL State spending increased by over ½ billion. You can go to the State website and see for yourself.

Consider this for a moment….

Your PFD would be about $3000 now if they followed the formula.

Your PFD last year… the first year legislation allowed the use of PFD earnings for Government… was $1600

Your PFD this year with the budget the legislature presented to the Governor would be about $800

Notice the trend? Because if you don’t you are failing to understand the message Gov. Dunleavy is telling you… which is… State spending is UNSUSTAINABLE. If State spending is going down, why is your dividend getting smaller?

The GROWTH of State spending, if not corrected, will first completely consume your entire PFD, then when that is gone they will impose Income taxes, pass more costs to local governments = local tax increases, etc. And finally when the PFD is gone and taxes can not be raised without diminishing returns, then they will be forced to cut an even greater amount than is being cut now. That is what unsustainable will lead to; guaranteed.

Let me be clear, I don’t mind part of my PFD being used to fund government if government spending is sustainable. If it’s not sustainable we could lose our entire PFD and it will only buy us a few years. We are too large of a state, with too small of a working population, with too few paying, to tax our way out of this.

A few thoughts …

The last version of Gov. Walker’s income tax proposal (payroll tax) would have brought in, after expenses, roughly $350 million. The amount the legislature INCREASED total state spending last year was over $500 million, and that is not including the deficit. Alaska has “0” billionaires and less than 1000 households earning a million or more per year to tax. The legislature estimated the number of new state employees required to administer a state income tax as between 60-120. An income tax would not cover a single year of growth in state spending and not even touch the deficit. An income tax is not the answer.

At current oil prices we can not raise oil taxes without depressing the industry and realizing diminishing tax returns. You couldn’t mail a pair of shoes from Prudhoe to Valdez via UPS for less than what a barrel of oil is selling for today. Stop believing the anti-oil propaganda. It’s not the tax rate that is the problem, it the selling price of oil and the quantity produced.

Only about 320 thousand jobs in Alaska (varies by season) and only 260 thousand Alaskans who work (many have more than one job). The number of working Alaskans is about the same as the population of Spokane Washington.

Alaska is the only state in the union that allows citizens in roughly ½ of the land mass (unorganized boroughs) to pay no taxes and receive basic services for free. If that were not bad enough, the State actually pays millions each year to those communities to administer the free services they receive. Additionally, many of the communities in these areas, about 150, citizens are allowed to collect welfare for LIFE (the remainder of the country has a 5 year lifetime welfare limit under Federal law).

30 percent of Alaskans — 219,734 are on State Medicaid. Under Gov. Walker’s “Medicaid expansion” enrollee population has grown by 49,719. The expanded group ARE able-bodied adults of working age, without children or disabled dependents.

Medicaid expansion has also resulted in a dramatic INCREASE in health care costs in Alaska as Medicaid does not pay the full cost of treatment resulting in the difference being passed on to insured Alaskans in the form of higher costs. A local example would be Ketchikan Teachers health care costs are up 19% this year and that cost will be paid by Ketchikan taxpayers. Just about everyone in Ktown has an example of being charged an astronomical amount for local health care.

Medicaid now costs $10,649 per enrollee, and per the state is projected to increase by $125 million per year. One of Gov. Dunleavy’s vetoes is trying to rein in this out of control program by ending one of the OPTIONAL parts of Medicaid…dental coverage. Think about it… if you are working or retired you pay a premium for dental care, yet the current State Medicaid system… literally… will pay to fly people from the farthest reaches of the state to a “hub” like Anchorage, pay cab and hotel costs and sometimes a family escort… for a dental cleaning. It’s insane.

The other main expense is education and we could easily save millions by simply requiring all areas of the state to form organized boroughs or pay an unincorporated area service tax to help fund education. Consider that the Organized Ketchikan borough has ONE school district. The largely unorganized island of Prince of Wales has FIVE school districts. The unorganized area of Pelican has its own Superintendent for a grand total of 8 students. Their school built, maintained and operated for free… the citizens pay no school taxes.

But we pay lots of taxes for our schools in Ketchikan… millions per year. In fact your entire borough property tax bill goes to education. It’s a MANDITORY State tax called a required local contribution (RLC), but only imposed on the ½ of Alaska that is organized like Ketchikan. My complaint is not that we pay it, but that only ½ of the State is required to pay it. Why should the owner of a million dollar house on POW be allowed to pay no tax, but a person in poverty in Ketchikan be required by the State to pay or face government seizure of their home?

The aforementioned items and tax disparity across Alaska IS the MAIN REASON STATE SPENDING IS DOUBLE THE NATIONAL AVERAGE and why we are facing this massive deficit. And now you know probably the most closely guarded secret of Alaska government. ½ the State pays for basic services… ½ doesn’t. ½ pay a mandatory school tax and ½ don’t. Nearly ½ the communities in the State get lifetime welfare (universal income) and many other things subsidized, ½ don’t.

Consider what would happen if the State of California was divided in the middle. The more populous south required to pay taxes and for many of their services, while the north would pay no taxes and get basic services for free. How long do you think California would last before bankruptcy? Probably not long, considering they can barely pay their bills now, yet that is exactly what Alaska has been doing for decades. Our fiscal day of reckoning has arrived. ½ the State simply can’t pay all the bills.

I’ve been saying for years that the deficit plan would eventually result in those paying taxes now… to pay more… so that those paying nothing can continue to pay nothing. My biggest problem with the Governor’s reductions is that they unfairly target the organized boroughs like Ketchikan. The ½ of the State that gets their schools built for free could care less about the veto reduction of School bond debt reimbursement… because they have no debt!

Quite frankly, if the Governor wants to discriminate against the organized boroughs like Ketchikan that were forced by the state to organize, then we may need to look at suing the state again. I can accept shared sacrifice Governor, but not discrimination. The school bond debt cut is discrimination. Just exactly what cuts did the REAAs (unorganized borough school districts) get in your vetoes Governor, because it looks like to me they are still getting everything for free.

I can only hope that Rep. Ortiz will finally start to listen to the City Council, Borough Assembly, and School Board who have sent him resolution after resolution… for years, pleading with him to stand up for us and demand an end to discriminatory taxation and assure the fair treatment of our island.

Had the legislature spent the last five years actually giving Alaska a SUSTAINABLE budget and imposing a shared approach by equal taxation, the Governors cuts would not have been necessary today and your PFD protected.

The legislature failed us. Any other person as Governor would have had to make a the same decision Dunleavy did… watch the dividend go away and taxes to spiral out of control or reduce spending to a sustainable level and maintain a PFD.

Just my thoughts as a private citizen.

Rodney Dial
Ketchikan, Alaska

Editor's Note:

The text of this letter was NOT edited by the SitNews Editor.

Received June 29, 2019 - Published June 29, 2019

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