Yukonomist: What if the money plane stopped coming?

Alaska’s governor proposes cutting a double-digit swathe through the public service

Have you ever wondered what would happen if the money plane from Ottawa stopped landing here?

Probably not. It involves parallel-universe concepts like us paying for our own highways or healthcare system. Picturing the Yukon without a dufflebag containing $25,650 per Yukoner per year is as hard to conceptualize as quantum physics.

However, if you ever did wonder, look no further than Alaska’s new Republican governor Mike Dunleavy and his budget proposal for the upcoming fiscal year.

Remember the controversy here when someone leaked a Yukon Management Board memo telling senior bureaucrats the Yukon government was looking to achieve “overall savings of one per cent”?

Well, Dunleavy’s budget isn’t “looking to achieve” a per cent or two. It proposes cutting a double-digit swathe through the Alaskan public service that would probably make Margaret Thatcher drop her handbag in shock.

Here’s a selection of his proposals, according to the Anchorage Daily News. Eliminate state funding for Alaska’s version of the CBC and for broadcasting legislative hearings. Cut the department of education by almost 20 per cent from US$1.66 billion to US$1.34 billion. Cut the department of health and social services by almost a quarter, from US$3.25 billion to US$2.47 billion. Dunleavy proposed a particularly savage cut for the University of Alaska, a shocking 41 per cent.

The Juneau Empire reports the governor is seeking a 75 per cent — yes, three quarters — cut in the Alaska ferry system. You may be driving the long way to your Haines fishing hole next year.

The governor also proposes completely eliminating the state’s division of economic development. Alaska media says that when the division was told of its fate, an all-staff email went out offering mental-health counseling.

Dunleavy’s cuts are even bigger than Alaska’s US$1.6 billion deficit. That’s because some state cuts result in the loss of federal matching funds. Medicaid spending would fall US$714 million in total, for example, and two-thirds of this is money from Washington, DC. Revenue from the federal government would fall over US$700 million in total, or almost 20 per cent.

Alaska’s big financial trouble pre-dates Governor Dunleavy. It does get a transfer payment from Washington, DC, but it is only a quarter of ours on a per-person basis. Oil production has been falling for years from the North Slope, and the take the state gets from each remaining barrel shipped is low due to lower global oil prices.

The state still has its famous Permanent Fund. Dunleavy could have implemented a state income tax, introduced a state sales tax, raised taxes on the oil industry, raided the Permanent Fund or cut the annual dividend from the fund paid to each resident. He chose instead to cut services.

Senator Bill Wielechowski, a Democrat from Anchorage, said that “Governor Dunleavy is declaring war on seniors, kids and the most vulnerable among us while holding harmless the most profitable companies in the world.”

Some politicians claim the proposal is shocking, but Alaskans can’t really claim to be surprised. Dunleavy campaigned hard on supporting the oil industry and, believe it or not, on making a one-time boost to the dividend to make up for cuts made by the previous governor.

Dunleavy won with 51 per cent of the vote, even after the incumbent governor dropped out to support Democrat Mark Begich and avoid splitting the vote.

Sometimes, elections do have consequences.

But this is Alaska, not a Canadian province or territory with an all-powerful majority premier. The state House and Senate now need to pass their own budget and negotiate a deal with the governor. The final outcome could look quite different from the governor’s proposals.

However, since the alternatives involve politically toxic moves like raising taxes or cutting the annual citizen dividend, I wouldn’t count too heavily on the Alaska ferry schedule being unscathed by the time fishing season rolls around.

Many Alaskans see the solution to the state’s fiscal crisis not in more taxes or borrowing, but in accelerating drilling for more oil and gas. Indeed, Dunleavy supports both a new pipeline to export Alaskan gas to Asia as well as plans to drill in ANWR and the calving grounds of the Porcupine caribou herd. Alaska Democrats accuse Dunleavy of sheltering the oil and gas industry from harm in his budget, demanding no new taxes and even offering additional tax credits.

We shall see how the negotiations between House, Senate and Governor play out. Remember that Dunleavy is in the first few months of what might turn out to be a two-term governorship. In the long run, Dunleavy may be remembered more for doubling down on oil and gas than for savage budget cuts.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist.

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