Juneau Empire reporters Kevin Baird, left, and Mollie Barnes interview Gov. Mike Dunleavy at the Capitol on Tuesday, Feb. 26, 2019. (Michael Penn | Juneau Empire)

Juneau Empire reporters Kevin Baird, left, and Mollie Barnes interview Gov. Mike Dunleavy at the Capitol on Tuesday, Feb. 26, 2019. (Michael Penn | Juneau Empire)

A conversation with the governor

Gov. says businesses will come back to Alaska if budget is balanced.

Legislators have been speaking about it. Alaskans have been speaking about it, and now Gov. Mike Dunleavy is speaking about it. The governor sat down to talk about his budget and the proposals to cut expenditures in it. Read the full interview below. The interview has been edited for length and clarity.

Juneau Empire reporter Kevin Baird: Governor, when you campaigned, you voiced some support for the ferry system, even calling it the ‘backbone’ of the Southeast. (This is in reference to an article in the Ketchikan Daily News). There’s concern over the closure after October, and whether or not the ferry system would be able to open afterward without funding to do so. How do you justify the campaign message with the proposal to Alaskans in the Southeast?

Gov. Mike Dunleavy: During the campaign we were told we were looking at $75 a barrel oil. Obviously that wasn’t the case. We’re down at $64 barrel oil, and we’re hoping that stays in the neighborhood of $60-64 a barrel. Even at that, we have a $1.6 billion deficit. This is a budget we put together that was an open budget, an honest budget for all Alaskans to look at in terms of what really are the fiscal realities we’re looking at. We’re also talking about the fact that we only have $2 billion left in our CBR, and the problems that will occur if we start to go into the earnings reserve at any great length or any depth, how that’s going to impact the fund going forward. Again, during the campaign we were told $75 barrel oil. We even had people tell us $80-85 barrel oil. That’s been revised, as a result we’ve had to revise this budget. And it’s a budget that’s going to impact all Alaskans. There’s going to be no group that is not going to be touched by the fiscal deficit that we’re looking at.

Empire reporter Mollie Barnes: You said that Alaska’s open for business. Do you have anything to say to business owners who are maybe scared of the ferry system closing down who rely on this?

Dunleavy: Once we get our structural deficit deficit dealt with, our $1.6 billion deficit dealt with, then we’ll have fiscal certainty moving forward. When we have that fiscal certainty moving forward, I’ve been told by many businesses that investment that’s been sitting on the sideline will start to come into Alaska — large amounts I’ve been told. What businesses are concerned about now, investors are concerned about now, is if we don’t get our fiscal house in order, we’re going to impose a predatory tax on these businesses, existing businesses and new businesses. So the biggest issue facing us right now is this gap, how we’re going to deal with it, and do we eliminate it moving forward. But the businesses I’ve talked to said, barring that, they’re hesitant to invest in the state of Alaska.

Barnes: I don’t know if you heard anything about the Senate Finance meeting this morning, but earlier today David Teal speculated that maybe your budget was a way to create chaos and force the Legislature to make the hard decisions and have this conversation about what is really worth it. Was that your intention?

Dunleavy: The first part, chaos — that wasn’t the intent that was to sow chaos, but certainly the budget is a conversation to have with the people of Alaska and the Legislature as to what we value, what we want to fund, what we can fund and how we fund it. This was a budget that was a balanced budget. We proposed a balanced budget. And part of that balancing act is the reductions of $1.6 billion. There are those that will propose we use the PFD, there will be those that propose we use taxes. I just think that causes more problems moving forward. Alaska with 730,000 people, high unemployment rate, lack of investment in the state of Alaska, I think if we start going down the road of taxing or taking money out of the pockets of Alaskans, we’ll see more of an exodus out of the state. New York, New Jersey, Illinois, California, Connecticut — there was a report this morning that says that’s exactly what’s happening in those states. There’s an exodus of individuals that are part of the tax base that make money, and they are leaving those states, net out-migration. We can’t afford that in Alaska, we’re already a high cost state. If we start taking more money out of the pockets of Alaskans, it’s going to force more people to decide if they want to stay or go, and I believe that more and more people will leave. We just went through a period of four years of spending an excess of $2 billion a year out of the CBR roughly, actually it was more than that. And yet, we’re still in a recession, and we still have individuals leaving the state of Alaska. We’ve got to get our fiscal house in order. We’ve got to get the structural deficit taken care of, and we have to do it sooner than later.

Baird: Going back to revenue for the state, so one of the things you’ve called your budget proposal is “predictable” and “sustainable,” and it heavily relies upon oil and gas revenue. Oil, we’ve already seen the fluctuations of per barrel oil price. Do you think it’s as predictable, do you think this budget formula that you’re working with is as predictable as you’ve sold it to Alaskans?

Dunleavy: If we close the $1.6 billion gap, and our expenditures and revenues meet, that’s a predictable budget. If we allow the people of Alaska to vote on the constitutional amendments that hem us in through an appropriation and savings limit as to the growth of this budget, that will help with predictability. If we allow the people of Alaska to decide if they want their PFD taken or any changes in the permanent fund, that will help with predictability. Another one of the amendments was if we contemplate a tax, do we ask the people of Alaska if they agree with that tax? That will help with predictability. You know the question is, what happens if oil goes to $5 a barrel, then that blows a hole through almost any program. And that’s a hypothetical, and we’d have to deal with that when that occurs. But I can tell you now, if we don’t reduce our spending, what is predictable is we’re going to spend down our CBR, constitutional budget reserve, that has $2 billion dollars left in it, we’ll spend that down in a little more than a year. If we don’t reduce our spending after that, we’ll go into the earnings reserve, and we’ll start to spend that down. That’s predictable. But that’s something that’s predictable that I hope we don’t want to have happen. So by reducing our expenditures, we get in line with revenues at $64 a barrel. If oil drops after that we’ll have to have that discussion on how we’re going to deal with it.

Baird: While we’re on this topic, do you plan on introducing any more budget related bills?

Dunleavy: We do, we’re working on that. As we start to roll them out, we’ll let you folks know.

Barnes: So is it predictable in the sense that, if oil prices do go down next year, that then your plan would be to just cut again. Or is there going to be any sort of minimum point?

Dunleavy: We’ll cross that bridge when we come to it. Again, we’re dealing with a hypothetical, we have to see what that is. We’d have to cross that bridge when we come to it.

Baird: Yesterday, Sen. Bill Wielechowski, D-Anchorage, sent out a press release about a legal opinion he’d got concerning some language giving OMB power to transfer funds across appropriations. I reached out to your press secretary for a comment on that. So here we are, and I was curious what your thought process behind that was.

Dunleavy: I’m not sure of the question.

Baird: So Bill Wielechowski sent out a press release yesterday that he’d gotten a legal opinion regarding some language in the budget bill that under each department it says something to the effect of the OMB would have the ability to move funds around within the department, and he called it a power grab. I talked to Senator Bert Stedman and he said he wasn’t worried about it. I was just kind of curious if you knew why that language was in there, and kind of what the thought process was.

Dunleavy: We’ve got two folks over here that can answer that.

Office of Budget and Management Policy Director Mike Barnhill: So there’s precedent for this. The most recent precedence … we call it rolling up the budget. The university’s budget, so it used to have several appropriations and now it’s rolled up, or at least last year it was rolled up, into one appropriation. And the idea, the budget rationale behind rolling up a budget is to give the department, or in this case the university, more budgeting flexibility to move money across component lines. And that’s the reason why the university proposed it. And that’s the reason why the OMB proposed that for all departments, so in times where we’re reducing the amount of revenues available for all departments, we’re giving them enhanced flexibility, so they can meet those challenges that are posed in the current budget environment. In terms of the legality of it, the Department of Law has looked at this. Attorney General may want to comment.

Attorney General Designee Kevin Clarkson: The Legislature fully has the power to delegate that authority if they so choose. And that’s the point of the appropriation bill, the Legislature would have to pass it. If they delegate that authority to the executive branch, they can do that.

Barnes: Earlier today, also, David Teal said that your proposals to repeal the oil/gas property taxes and some of the fish business taxes would simply be shifting the burden from the state to local municipalities and other governments. Do you think it was misleading to say that there would be no tax hikes?

Dunleavy: When I ran for office?

Barnes: Yes.

Dunleavy: No I don’t think it was misleading. Again, we have no intention of imposing taxes at the state level on Alaskans. Local municipalities are going to have to decide, as we are right now. They’re going to have to have the same conversation, what is important to them, what are the programs and services that they wish to fund and how do they wish to fund them? That’s their decision at the local level. So no, I don’t think it was misleading at all. We’re sticking with our campaign promises to deal with this fiscal issue.

Baird: Switching over to some crime-related stuff, there’s a national shortage of police officers. Departments all over the country are having trouble filling positions. I was curious with the public safety initiatives if your administration was taking an approach to maybe attract more law enforcement officers to this state.

Dunleavy: That was one of our campaign promises, as well, that we’re going to improve the public safety outcomes for Alaskans. We understand that that means we will be putting more money into public safety, which we are. We’re in conversations with the corrections officers’ associations, as well as the Troopers and others, on how do we recruit and retain individuals to be part of this public safety approach, Troopers, corrections officers and others. So we’re having those conversations, and we’re fully prepared to put more resources into that, because we need to.

Baird: Does that mean higher salary compensation packages for State Troopers or?

Dunleavy: There’s all kinds of possibilities.

Governor Spokesman Matt Shuckerow: And we can get you the specifics.

Barnes: Switching topics a little bit, proposing to eliminate the Marijuana Control Board, how do you see that functioning then under the Department of Commerce, the regulation of that industry?

Dunleavy: I’m hoping that it streamlines the process, and that decisions can be made quicker for that industry. That’s the hope.

Barnes: Can you elaborate on that? What types of decisions and who would be involved with that?

Dunleavy: The commissioners, the commissioner that’s overseeing that department. Again, we’re trying to streamline government across the board, and this is one approach that we’re hoping helps streamline the process so that any regulations that come out, come out in a manner that’s going to support any of these industries or all of these industries.

Shuckerow: In addition, there’s legislation forthcoming, so some of those details will be contained in the bill. Other states regulate marijuana at an agency level. Colorado does it. There is a rule making process that things would follow. So I’m happy to send you information on that, as well.

Barnes: OK, thank you.

Baird: How soon might we expect more crime bills to come forth?

Dunleavy: General?

Clarkson: I think you’ve got the package.

• Contact reporter Mollie Barnes at mbarnes@juneauempire.com or 523-2228.

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