Dunleavy gives right-wing group a false account of Alaska response to oil price collapse

I suggest that everyone listen to this two-and-a-half-minute segment of Gov. Mike Dunleavy’s speech to the Heritage Foundation Monday.

Dunleavy would never give this synopsis of what he claims happened in Alaska after the 2014 oil price crash to an informed audience in Alaska.

It would be immediately recognized as dishonest by anyone who has followed the political struggles that followed the long fall from $100 oil and the many attempts to create a sound fiscal policy.

But a right-wing crowd in Washington, D.C., ignorant of the facts, was a perfect audience for a visiting governor eager to portray himself as the champion who cut the political establishment down to size with his fearless use of the budget veto in June.

The crowd didn’t know that during his years in the state Senate, Dunleavy, along with Sen. Kevin Meyer, now the lieutenant governor, helped block a sustainable fiscal plan and peddled budget nonsense for years, spending billions in savings.

The crowd didn’t know that state spending fell after the oil price collapse, contrary to what Dunleavy told them.

The crowd didn’t know that Dunleavy’s campaign for governor was founded on his claims of budget cuts no one would notice—the 2,000 ghost jobs, combining insurance plans, making Mediciad more efficient, etc.

The crowd didn’t know that most of what he vetoed in June wasn’t cut from the budget at all, because he reversed himself on more than $150 million in vetoes and a large chunk of other cuts turned out to be illusionary and will have to be made up in 2020.

Whoever wrote the speech for Dunleavy either doesn’t know what actually happened over the past five years or doesn’t care. For Dunleavy, who delivered the speech, there is no excuse for the distortions.

Here is what he said:

”I took office last December in the midst of a financial meltdown in Alaska. After years of inaction, the annual deficit had climbed to $1,6 billion,” he said.

The oil price collapse was an “unmitigated crisis” and an “entirely predictable crisis,” he said.

"Rather than face these revenue projections head-on, our state political leadership chose to increase spending during this time. Exaggerated revenue estimates and clever budgeting gimmicks became commonplace, allowing appropriations to hide the true extent of the crisis from the public. This policy of inaction and deception proved to be an unmitigated disaster. For the first time we were forced to dip into our oil wealth savings account called the Permanent Fund, just to keep the lights on."

He said he began his term "by directing my staff to publish a transparent and honest assessment of Alaska's finances. No more deception. No more disinformation. No more time to stall. And when some of our state's big-spending politicians decided to ignore these warnings, I utilized my veto power to cut spending by $650 million. This was the largest budget reduction in the state's history and a critical first step towards getting Alaska back on track.”

The state reduced spending under former Gov. Bill Walker, when Dunleavy was a member of the Senate Finance Committee. His claim that the Walker administration and legislative leaders deceived the public and hid the “true extent of the crisis from the public,” is a lie. Everyone in Alaska who wanted to be informed could have been informed.

It is true that stalling took place, largely because Dunleavy and the other Republicans in the Senate refused to enact taxes or cut the Permanent Fund Dividend, preferring to drain $14 billion from reserves.

Perhaps Dunleavy wasn’t paying attention during the long hours of testimony over the years about the need for decisive action to create a sustainable budget because reserves wouldn’t last forever.

On Jan. 22, 2015, Dunleavy was warming a chair in the Senate Finance Committee when David Teal, the director of the Legislative Finance Division, said that the major reserve funds, aside from the Permanent Fund, were at risk of being depleted.

Teal said that day that if legislators believed oil prices would stay near $60, “you have to do something and do it quick.”

“You don’t have a lot of time left, in terms of reserve balances, at $60 oil,” Teal said nearly five years ago. “Your choice now is fall off a cliff or build a ramp.

Oil is now near $67, but the state revenue forecast predicts that $59 oil is in our future for the fiscal year that begins next July.

There is a cliff that awaits the state under the latest Dunleavy budget to spend $1.5 billion from savings in the next fiscal year, exhausting all reserves except the Permanent Fund by 2021. There is no ramp.