A state government hiring freeze.
A freeze on travel by state employees.
A downgrade in the state’s credit rating.
The president of the state Senate indicating he will introduce legislation to impose a statewide sales tax.
Those recent developments should serve as yet another warning to Alaska legislators that the budget crisis is a real crisis and not the sort of crisis made lesser in severity by the knowledge that the price of oil, the source of revenue for most of the state government’s spending, would surely rise again — as it often did.
In each of the recent budget crises, legislators in the majority have put paring government spending atop the list of options, generally relegating revenue ideas to a darkened corner with a sneer. True, some ideas did advance further in the process than others, but cutting, cutting, cutting has for years been the dominant philosophy-driven choice.
The result now is that we have approached the point at which the impact of the reductions has become more visible to more Alaskans. Cutting alone won’t cut it when it comes to a long-term fix.
The hiring and travel freezes announced by Gov. Bill Walker last week shouldn’t come as surprise. Such actions are among the easiest to take and send a quick message to the public during a time of accelerating crisis. News that University of Alaska President Jim Johnsen is following Gov. Walker’s suggestion to do likewise is of particular note in Fairbanks, home to not only the University of Alaska Fairbanks but also the University of Alaska system offices.
The hiring freeze hits home for people because it affects the economic situations of those who had hoped to gain one of the state or university jobs, which generally pay well and have good benefits, including a generous retirement system. The freeze may also mean a reduction or delay in services to residents.
Other impacts have surfaced: the proposed closure later this year of highway maintenance stations, including one on the Steese Highway of importance to the small communities Central and Circle, and reductions in courthouse hours.
The credit rating downgrade from Standard & Poor’s came on the same day that the governor announced the hiring and travel freezes. Its financial impact on Alaskans is nonexistent and is minimal for the state government, but it could have — and should have — a big public relations effect on Alaska legislators as they get ready to reconvene this month in Juneau for the annual lawmaking session.
And it should be another wake-up for Alaska residents who refuse to recognize that the state cannot cut its way out of this long-term and multibillion-dollar budget problem.
The S&P report puts it bluntly:
“The negative outlook continues to reflect our opinion that if lawmakers do not enact significant fiscal reforms to reduce the state’s fiscal imbalance during its 2016 legislative session, Alaska’s downward rating transition will likely persist. Furthermore, it’s possible that the downward rating migration could accelerate if lawmakers continue to fail to act as the state’s budget reserves (not including the permanent fund) approach depletion.”
And it includes this worrisome nugget about Gov. Walker’s plan to control the deficit through an income tax, a change in the Alaska Permanent Fund, and some additional budget cuts: “However, the politics of enacting what amounts to an austerity-based overhaul of state finances render its prospects uncertain.”
Another leading ratings agency, Moody’s Investors Service, left the state’s rating unchanged this week while clearly pointing out the budget situation. But it also fretted about the future of Gov. Walker’s plan.
“The governor’s overall plan will be politically difficult to implement given the call for an income tax and the smaller size and shift in funding of the resident dividend program,” the Moody’s report states. “…there will be opposition by many Alaskans, whose wallets’ would take a hit from both a new income tax and a reduced dividend.”
The worrying by the two highly respected credit rating agencies is well-founded. That’s because it’s been said year after year that nothing gets done in Juneau in an election year because legislators are too worried about their political fortunes to cast a vote of any major consequence.
2016 is an election year and Gov. Walker’s plan is an item of major consequence.
So here is a message for our local legislators, Senate Majority Leader John Coghill, R-North Pole; Sen. Pete Kelly, R-Fairbanks; Sen. Click Bishop, R-Fairbanks; Rep. Steve Thompson, R-Fairbanks; Rep. Tammie Wilson, R-North Pole; Rep. David Guttenberg, D-Fairbanks; Rep. Scott Kawasaki, D-Fairbanks; Rep. Adam Wool, D-Fairbanks; and Rep. Dave Talerico, R-Healy:
You legislators are there to work with Gov. Walker to get Alaska out of this grave financial situation, the election be damned. If it costs you your elected position because too many Alaskans don’t recognize the severity of the problem, so be it.
— Fairbanks Daily News-Miner,
Jan. 9
