March 1 - Alaska Business Report Card Mid-Session

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March 1, 2016 Dear House Finance Member: Earlier this session, you received a letter from the Alaska Business Report Card (ABRC) group sharing the policy priorities that we would be emphasizing this session as we compiled the ABRC grades. Under the responsible budget heading, the first priority was to “focus first and foremost on reversing the unsustainable state budget growth…” Now that your subcommittee work on the operating budget is complete, we write to ask you to look for more opportunities to reduce the operating costs of state government. In reviewing the preliminary operating budget close-outs of the various House Finance subcommittees, it appears that the reductions the subcommittees have achieved to date are not sufficient given the urgency of the current fiscal crisis. Alaska’s private sector is suffering through a deep and prolonged downturn in commodity prices while development and operating costs continue to rise. Companies are cutting budgets and making tough investment decisions. Future prospects and projects in Alaska are at risk. Exploration activities are sharply down. Since 2015, companies tied to the oil and gas industry in particular, have been reducing their operating costs to accommodate the low oil price environment. Reductions in rates, reductions in compensation and now hundreds of layoffs. Part of the solution to the current fiscal crisis will inevitably involve use of Permanent Fund earnings. However, the voting public is unlikely to support use of Fund earnings until substantial budget reductions are achieved. Based on our assessment of the preliminary close-outs, another $300-500 million in reductions should be achieved. With this letter, we are taking an unusual step in commenting on the budget mid-session. We want you to have the benefit of some timely feedback from the Alaska Business Report Card group during this time of fiscal crisis. If you have any questions about the groups’ responsible budget policy, please feel free to contact any of the participating organizations. Thank you for your consideration Respectfully, Alaska Chamber Alaska Support Industry Alliance Resource Development Council for Alaska, Inc. ProsperityAlaska.org