Dunleavy campaign pitches irresponsible claims about Alaska's finances

It clear that Gov. Mike Dunleavy hopes to win reelection with the fiscal fantasy trifecta of his 2018 campaign—oil prices will be high, oil production will increase and the Permanent Fund will never stop growing.

This leads to nirvana with no new taxes, larger Permanent Fund dividends, and no cuts to government services that anyone will notice.

Numerous dubious assumptions that Dunleavy and his budget experts have concealed or downplayed in their Wizard of Oz-level strategy deserve examination by legislators and Alaska news organizations.

When Dunleavy agreed to stop pleading the Fifth Amendment and have his state-funded campaign respond to written questions from Alaska news organizations, the end result was one of his patented exercises in evasion.

Asked how he would balance the budget, he or his state employee “volunteer” said it’s already done and there is no need to raise any tax or cut any services.

“The budget is balanced, and we have a surplus that will put billions of dollars into savings for the Constitutional Budget Reserve, the Higher Education Fund and K-12,” Dunleavy’s “volunteer’ wrote.

For good measure, he responded to a question about whether taxes are needed with an emphatic “No.”

“The budget is balanced, and any new taxes should be subject to approval by the people,” Dunleavy claimed.

But Dunleavy is lying to Alaskans about the state of our finances.

The balanced budget claim is precarious. Almost preposterous.

It is based on an assumption about oil prices between now and next summer. Alaska has no knowledge of what’s going to happen with oil prices, which have fallen by one-third since June. Every budget claim has to come with the confession that it may be delusional.

Meanwhile, the Alaska Permanent Fund has lost about $10 billion this year. There have been no Dunleavy press releases blaring this news and the risk that creates.

There is a real chance that the budget is not balanced and that there won’t be billions of dollars of surplus funds by the end of this fiscal year.

For an honest portrayal of our tenuous situation, read this from veteran Alaska journalist Larry Persily:

“If oil prices hang around the $80s through the end of the fiscal year next June 30, the state could be in a budget deficit, needing a supermajority of legislators to tap a limited ‘rainy day’ savings account to cover the costs of public services and the big dividend payout Alaskans started receiving last week. It would not be optional — the dividend checks will have been cashed, and funding for schools and other public services will have been paid. Lawmakers will have little choice but to dip into the dwindling savings account, the Constitutional Budget Reserve, which was down to $1 billion as of Aug. 31.

“The facts are lower oil prices could deplete the only sizable savings account left, the budget reserve. The Permanent Fund’s market value is taking a nosedive and pulling the earnings reserve down on the dive. All the while some candidates for state office are talking about what they would spend more money on—particularly the dividend—and how they oppose any new taxes. It just doesn’t add up.

“We have no fiscal plan, and that’s irresponsible,” Persily said.

In 2019, when Dunleavy proposed massive state and local government budget cuts, he said he had to do so because he had campaigned the year before on oil price assumptions that turned out to be wrong. But it wasn’t his fault, he said.

“During the campaign in the summer and fall, we were told that the revenue picture was gonna be $75 a barrel oil,” Dunleavy said in February 2019.

Oil prices might rise and prove Dunleavy right this time. He can only hope that the OPEC cartel and its allies succeed in cutting world production to try to prop up prices. He won’t ever admit that he is cheering for OPEC.

If the cartel and other countries don’t cut production and world economies decline, the balanced-budget claim could fall apart.

In either case, it’s irresponsible to claim the budget is balanced. We are in this position not because of Dunleavy’s leadership, but because of Putin’s invasion of Ukraine.

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