Alaska’s billions

'Sometimes Alaska seems like a foreign country," your columnist once heard a Yukoner remark in Skagway. The mountains and rivers may look the same, but our Alaskan cousins do things a bit differently.

‘Sometimes Alaska seems like a foreign country,” your columnist once heard a Yukoner remark in Skagway.

The mountains and rivers may look the same, but our Alaskan cousins do things a bit differently. It goes beyond accents, gun laws and those liquor stores Yukoners love to visit.

Alaskans have a dramatically different approach to budgets and funding their public services. As our politicians debate the Yukon budget, it is interesting to compare our two approaches. We both have similar challenges: meeting local needs as the financial crisis hits both local economies and the federal governments that send so much money north.

Alaska’s operating and capital budgets were $9.3 billion this fiscal year. That’s about $18 thousand per Alaskan in Canadian dollars, versus about $30,000 in Yukon government spending per person.

Washington is less generous with transfer payments than Ottawa (although the Pentagon’s spending in Alaska dwarfs Canada’s budget for the Whitehorse Cadet Camp and the Rangers). Alaska gets about 30 per cent of its budget from the federal government, versus about 80 per cent for the Yukon.

Instead, the Alaskans have their Permanent Fund, the state’s snowy day fund created by decades of oil revenues. It now amounts to $27 billion. It’s down about five per cent in the recent market mayhem, but will still likely fund a “dividend” to each Alaskan of about $1,400 next year. In contrast, we pay Yukon income tax of seven to 13 per cent.

But the oil has also made Alaska more vulnerable to global markets. Indeed, one of the Alaskan senators posts the price of oil in the legislature’s hallway every morning in case any one forgets where the state’s wealth comes from. And with oil prices down from over $150 per barrel to the $50 range, Alaska is feeling the pain. In contrast to the Yukon’s transfer payments, which keep going up, Alaska’s revenue is actually forecast to fall significantly.

Governor Sarah Palin’s fiscal 2010 budget proposal, which has still not been finally agreed upon in the state house and senate, differs dramatically from the Yukon government’s approach. Palin suggests a cut in spending, driven by both falling oil revenues but also a conservative belief in smaller government.

On the other hand, she has protected some priority social spending from the cuts. In her budget proposal to Alaskans, the first five priorities she identified for funding were in education: over $1 billion for the public school system, with specific funds targeted on intensive needs students, pre-school pilot programs, Head Start and so on. Steady increases in core funding are pencilled in until 2011 despite the overall revenue issues facing Alaska.

The Yukon government, in contrast, plans to cut public school funding in inflation-adjusted terms, with 10 other departments getting treated more favourably in terms of funding growth.

It’s sad that even Sarah Palin, alpha female of the Republican right wing wolf pack, believes more strongly in public education than the Yukon cabinet.

Governor Palin’s national notoriety has added spice to the usual budget debate in Juneau. House and senate politicians complained that she was more interested in the 2012 presidential election than her day job when she left Alaska during the critical final week of legislative debate to speak at the massive Indiana Right-to-Life Banquet.

She also announced she planned to refuse several hundred million dollars of President Obama’s federal stimulus money, a threat also made by Louisiana governor Bobby Jindal. Both Jindal and Palin are, of course, leading contenders for the 2012 Republican presidential nomination and are keen to position themselves as fiscal conservatives. Both argued that the federal money came with too many strings attached, and required the states to commit to permanent increases in social spending that the governors disagreed with.

Alaskan politicians of both parties reacted unfavourably to Palin’s stance, with the house voting 40-0 to accept all the federal money. Anchorage Republican Mike Hawker, house finance committee co-chair, told the Juneau Empire that he disagreed with Palin after studying the fine print. Hawker went on to stress the need to spend now to boost the economy, saying that he was in favour of “doing it this year, doing it quickly and doing it soon.”

This is also in contrast to the Yukon government’s approach, where ministers have adopted a leisurely plan to consult this summer and decide on how to spend the Yukon’s federal stimulus money later.

Overall, the Alaskan system of separating the governor from the legislature makes for a more confusing budget process. But it is also more open to give and take. Governor Palin’s proposed budget will be amended in important ways before it passes, something that is practically unheard of in the Yukon.

The premier drafts the budget with a small circle of advisors and, once on paper, it seldom changes no matter how loud cabinet ministers moan in private or the opposition complains in public.

And while our transfer payment formula is safer than Alaska’s reliance on oil revenues, we also have to admit that the Alaskans are more independent than we are.

Keith Halliday is a Yukon economist and author of the Aurore of the Yukon series of historical children’s adventure novels. His next book Game On Yukon! appears in May.