The governor's budget proposal blows through our remaining state savings accounts. Far from being fiscally conservative. it actually drains the Constitutional Budget Reserve (CBR), by two thirds, leaving the state with only minimal savings.
Further, the governor's budget jeopardizes the long-term health of the Permanent Fund. The governor proposes paying back four years of reduced dividends, which could cost about $5.5-$6 billion from the Permanent Fund and essentially be like taking money from your children's college savings account to pay for the mortgage. It can be done in an absolute emergency but should never be done if you can find any other solution.
Such a transfer would risk our state's fiscal stability by spending far more than the 5% allowed by the Percent of Market Value formula set in law. We need to continue to responsibly manage this fund that now provides two-thirds of the state's revenue as well as annual dividends to Alaskans.
The time for avoiding discussion of potential new revenues for the state is over.
We are nearly out of savings, the Permanent Fund cannot bridge the gap without risking its sustainability, and oil production is forecast to plateau and then decline about 4% per year despite new projects coming online.
While I am disappointed that the governor did not propose a solution himself, I am grateful that he heard Alaskans and did not propose a budget like last year's. Now it's time for Alaskan's to step up and do what we have always done in tough times--roll up our sleeves and get to work. I look forward to doing the hard work of working out potential solutions to our state's fiscal problem this upcoming session.