For the second day in a row, the Senate Finance Committee hosted a repeat presentation on “Alaska’s Fiscal Crisis,” this time with Office of Management and Budget Director Pat Pitney.
Majority members in Senate Finance held a press conference on Tuesday enlisting the press to communicate to the public the state of the fiscal situation. The following day, Legislative Finance Director David Teal returned to Senate Finance to enhance the Senate’s messaging on the need for cuts during budget negotiations with the House.
Pitney returned to Senate Finance on Thursday, even using the same Power Point presentation dated January 23, when she first gave the committee a budget overview. There was no new information there, but comments from committee members strongly suggest that the Senate and Gov. Bill Walker have very different philosophies about how to move forward.
The Walker administration has been asking, “What is the right size of government?” said Pitney. “That right size of government is different for every individual person.”
In comparison to other states, Alaska’s budget should be between $4.8 billion and $5.3 billion. With the proposed cuts, she said, the state is within that range.
In June, the administration plans to reconvene the transition team that met publicly for several days in Anchorage prior to Walker taking office. Pitney told the committee that the team, with the addition of more participants, will have a conversation.
“What do we value in this state?” asked Pitney. “What are we willing to reduce? What are we willing to generate revenue for? And then how would we be willing to generate that revenue?”
Some of the ideas the administration is proposing are bringing multiple loan funds, like student and commercial fishing loans, under single management. Outsourcing and privatization are also on the table, though Pitney told a visibly disappointed Sen. Mike Dunleavy (R-Wasilla) that private school vouchers are not a high priority.
After discussing these issues, the transition team will create what Pitney called a “meeting in a box” to take to numerous public audiences for information and feedback.
“The idea of a… road show, I don’t know that’s going to produce the answers we want,” Se. Pete Kelly (R-Fairbanks) said in reaction. Kelly said he learned from a sales manual that “If you think you should do something, then do it. If you think you shouldn’t do something, then don’t do it.”
Cuts and/or Taxes
“What I’m starting to hear, I think,” said Dunleavy, “what I’m starting to feel, which I don’t usually operate in that manner — is we’ve gone too far. ‘We’ve got to start looking at taxes.’ And I’m just being blunt. I’ve got to say there’s a large number of Alaskans that aren’t there yet on the tax thing.”
Pitney confirmed that the Walker administration believes some of the Senate cuts have gone too far. “I’m sure you’re getting a lot of reaction to the $47 million reduction that’s unacceptable to some,” said Pitney, referring to education formula funding cuts beyond the $32 million cut recommended by the governor.
Sen. Peter Micciche (R-Soldotna) asked how Walker plans to achieve his goal of 25 percent reduction in government if this year’s nine percent reduction is not being well received.
25 percent may not be reasonable, responded Pitney. Raising public awareness and getting feedback will be key, she said.
“Will the public give us an answer?” asked Pitney. “No. I’m not thinking the public will give us an answer. Will they give us permission? No. Will they know the situation all of us are facing? I do believe they will know the situation we are facing.”
“I think many people are surprised to understand that we’re using almost twice as much of our savings to cover our budget than we have in annual revenue this year,” she told the committee. “I don’t think people realize the magnitude of annual revenue compared to what it was in the past. I don’t think they realize, either, that at $90-a-barrel oil, we still have nearly a $2 billion gap… In 2004, $90-a-barrel oil would have been $10 billion a year.”
Micciche responded that he was disappointed to meet resistance to budget cuts, which he said are necessary. “We learned a lot yesterday,” Micciche said of Teal’s presentation to Senate Finance.
That seems unlikely given that Teal’s presentation was nearly identical to his presentation in January. Teal made it clear at that time that the state would have to raise revenue. The Senate Finance Committee has not looked at doing so.
“Do we want to do large, large cuts, or do we want to talk about what are the priorities?” Pitney asked on Thursday. “Where does education fit in this priority? What are the investments that we want to make? And then work with the realization there is a revenue gap.”
“You cannot tax your way out of this,” said Dunleavy. “It’s not going to happen.”
Finance Co-chair Sen. Anna MacKinnon (R-Eagle River) was also wary of an income tax. “Leaving individual families with their income is something this state has prided itself on,” she said.
Alaska is a wealthy state, Pitney told committee members. Taxation is not the exclusive revenue option, but people need to be given the opportunity to weigh in.
Kelly asked Pitney what Walker’s plan is to contain the cost of education, the largest item of the state budget. “If we don’t cut education,” he said, “we’re really not cutting the budget.”
The legislature tried to engage the public last year during negotiations over an omnibus education bill, HB 278, said Kelly. “The only thing they would say, over and over and over again, is, ‘Give us more money,'” asserted Kelly.
Incidentally, HB 278 provided for $32 million in one-time education funding that the governor and the legislature have proposed to cut this year.
Kelly said negative reaction to education cuts has been dramatic. He received 1,000 emails in three days, he said.
They’re obviously an organized effort. This isn’t just a spontaneous thing where Sally and Sid Alaskan are jumping to their computers because of this… We can’t get into a reasonable dialogue over some of these things because every dollar in state government has a constituency, and some of the dollars have a much more active constituency. That’s also one of the reasons why I’m not that positive or enthusiastic about going on the road because what happens is the road shows, the sincere effort on the part of the government to get feedback from the public, what happens is that the organized groups take over those meetings. And you get more, “We need more money. We need more money.”
Dunleavy agreed that the public is impeding a conversation about education structure and funding.
We can’t get there because the moment we get there, as Sen. Kelly said, the emails start flying, the lobbyists are lined up at the doors, and whatever started out as a conversation on education soon dissipates… I can guarantee you this. If you want the emails to stop and you want the lobbyists to stop lining up at your door, put $200 million into it. I guarantee it’ll stop, but it doesn’t help this state get any closer to solving its fiscal issue, and it doesn’t get this state any closer to solving the educational issues that have bedeviled the state for some time.
Pitney reminded the committee that there are budget drivers other than education, including the Permanent Fund and tax credits for oil and gas companies. Kelly called the debate over those credits a “red herring” on Tuesday.
Kelly: “Government Has Had a Good Run, But Things Have Changed.”
MacKinnon pointed out that next year’s projected revenue of $2.2 billion will not be enough to pay for education and the Department of Health and Social Services, which includes that other large budget driver, Medicaid.
In response to Sen. Donny Olson (D-Golovin), Pitney said that the Walker Administration still supports Medicaid expansion. It will save the state $6 million next year, she said, and $100 million in three to five years. Meanwhile, $147 million in federal funds will flow to the state next year, increasing to $250 million. Pitney called the federal money a “stabilizer for this economy.”
MacKinnon disputed the administration’s math. Indian Health and TRICARE recipients are currently 100 percent covered by the federal government. How can the state realize savings by adding these people to the Medicaid rolls and paying ten percent, she wondered.
Not all of the 20,000 people currently on Medicaid are Indian Health recipients, responded Pitney. The state is currently paying more for them than it would under expansion.
The committee could hash out that math if it scheduled a hearing on Medicaid expansion, Pitney said, in a quiet dig. Medicaid has already received 26 legislative hearings.
“The administration would very much appreciate the opportunity for the Medicaid hearing in Senate Finance,” she told its co-chair, MacKinnon.
Senate Finance has had the Medicaid expansion bill in its possession since April 11, yet no hearing has been scheduled. Walker has asked the legislature to hold hearings on Medicaid and Erin’s Law while budget negotiations continue. None have been scheduled, but Senate Finance will hold yet another hearing on “Alaska’s Fiscal Crisis” on Friday, the fifth day of overtime.
“Government has had a good run, but things have changed,” said Kelly Thursday, ending the Medicaid discussion. “If we have to go to revenue measures, we’re not looking for Mr. and Mrs. Alaska, who don’t draw a paycheck from government, who don’t have their lives wrapped up in a government grant or something like that, we’re not looking to them to keep the lifestyle of government going as it’s been over the last 30, 40 years in Alaska.”
“The government has had a good run,” Kelly concluded, “but that time is over.”