Jan. 22, 2016
In his second State of the State address to the Legislature, Governor Bill Walker recapped his first year in office, and described some of his hopes for the future. His main message, though, is that legislators, through their actions, or inaction, in coming months, will make important, even historic, decisions affecting the future of Alaska.
Gov. Walker began by listing accomplishments ranging from Medicare expansion and an investigation into deaths in corrections facilities, to regulations that will ease the adoption of Native children by Native families and talks with oil and gas companies to boost production.
Walker outlined ideas for strengthening Alaska’s economy. by investing in education and infrastructure, cutting energy costs so industry can expand, and getting a gas pipeline built.
The heart of his speech, however, was a call to address the state’s budget deficit.
For the past three years, our growing deficits have been covered from our savings. If we continue down that path, those savings will be depleted in less than four years.
Walker then laid out his proposed three-prong solution.
“The first part of the plan calls for spending cuts. We’ve already begun." Walker told Legislators, "Working with you, we cut close to a billion dollars from the state general fund spending this fiscal year.”
Walker has additional cuts and streamlining in the works, but he said cuts are not enough.
“The reality is this. If we laid off every state employee, every state employee, it still would not make much of a dent in the deficit,” said Walker. “Cuts alone cannot solve our budget challenge. And time is of the essence.”
The second part of his proposal is to increase revenues. Walker is proposing increased alcohol, cigarette and fuel taxes, and higher fees, as well as an income tax.
“I'm proposing a modest income tax linked to the federal income tax. It amounts to less than 1% of the gross income for the average Alaskan. We selected an income tax over a sales tax for a couple of reasons,” said Walker. “First we wanted out- of-state workers who commute back and forth to Alaska to contribute to the solution. We also were sensitive to local governments that already have a sales tax. We didn't want to stack a state sales tax on top of a local sales tax.”
The third part of his proposal is to restructure the permanent fund to draw the cost of state operations from its earnings. Dividend checks, he said, would be funded with resource revenues.
“The first year dividend checks will be funded at a flat one thousand dollars for each qualified Alaskan residents,” said Walker. “Since the permanent fund program began, the average dividend check has been about 11-hundred 50 dollars. Going forward the dividends would be tied to resource royalties. There will be no cap on the dividends. I repeat, there will be no cap on the dividend.”
Walker bolstered his case by describing his family’s response to the 1964 earthquake and tsunami that demolished Valdez, his home town.
“The earthquake destroyed whatever financial stability my family had managed to build. All the material we had purchased for two construction projects were on the dock that day, all uninsured. The tsunami had swallowed it all,” said Walker.
Walker was twelve at the time. He said his parents could have declared bankruptcy and written off their debts. Instead, Walker told Legislators, the family sought new revenues.
“My family became the school janitors,” said Walker. “Every day after school my buddies would take off to shoot hoops and hunt ptarmigan. I went to the janitorial closet picked up the mops and brooms and spent the next four hours cleaning the junior high and high school with my brother and sister. Our dad cleaned the grade school. We were fortunate to have the work.”
The governor then told Legislators it’s time to think of Alaska, not the next election.
“Many advised me not to recommend changes to the permanent fund dividend and certainly not to propose any taxes. They warned that should I take such bold steps to fix our fiscal challenge, those actions would hasten the end of my political life. To those who question my political wisdom, I admit I may not be politically savvy,” said Walker. “But I'm a loyal son of this great land, and as your Governor, I will always put Alaska's interests above my own.”
At the end of his speech, Legislators rose to their feet in a standing ovation. However, that doesn’t mean Walker has an easy course ahead. Legislators on both sides of the aisle have been critical of some of his ideas.