Special Session Compass

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Budget concerns threaten economic confidence By Curtis W. Thayer A $4 billion spending gap isn’t the only crisis facing lawmakers and the Governor this year in this special session. Elected officials are also facing a crisis of confidence. Each year the Alaska Chamber conducts a statewide poll to gauge voter perception of business and the economy. The results this year clearly show all eyes are on Juneau, and Alaskans are increasingly pessimistic that we are on the right path toward a balanced budget. Juneau, we have a problem... The State’s inability to restructure government to a, sustainable level is reflected in Alaskans’ perception of the economy. Last year, most Alaskans held State government in relatively high regard, with 64 percent reporting a favorable or better opinion. The number of Alaskans with faith in State government has plummeted over 20 points in 2016. We’ve also heard increasing concern regarding the State’s money troubles impacting Alaska’s economy as a whole. In 2015, Alaskan’s were well aware that State spending had ballooned to unsustainable levels. More than half of voters polled recognized the budget was a problem; one-fifth said State spending was a crisis. But this year the number of Alaskan’s concerned about State spending is overwhelming. Voters declaring the budget as a crisis have more than doubled, climbing to 49 percent in 2016. What’s behind these big swings in public concern? Rewind to early 2015. Alaska had a new Governor with tough talk on spending. Legislators were arriving in Juneau with commitments to make the difficult decisions needed to prune a $6 billion spending habit down to a sustainable level. Now – 18 months, two legislative sessions, and a bewildering collection of special session activities later – Alaskans no longer believe the State is willing to make lasting changes to spending. A universal concern When asked what the most important issue the Alaska Legislature should tackle this year, Alaskans resoundingly answered, “fix the budget.”

471 West 36th Avenue, Suite 201, Anchorage, AK 99503 Ÿ (907) 278-2722 Ÿ alaskachamber.com

In 2015, balancing the budget was already the most mentioned expectation for lawmakers. The issue eclipsed constants like education funding and even spending cuts; those two priorities were tied in second place. This year, however, 48 percent of Alaskans polled want the State budget deficit dealt with. The second most commonly volunteered priority is cuts to spending. Funding State services like economic diversity initiatives, and even education funding, are in the single digit percentages. These numbers illustrate a dramatic uptick in public concern. Last year, Alaskans were bullish about the economy, even while acknowledging that public spending was an item of concern. This year the number of Alaskans stating the economy is good or very good dipped below 50 percent. Correspondingly, 71 percent of Alaskans now believe that Alaska is on the wrong track, up from just 32 percent in 2015. So what do Alaskans believe is the solution to the State’s budget woes? More than anything, Alaskans want deeper cuts to State spending. More than any option, including new taxes or tapping into Permanent Fund earnings – more even than a combination of taxes and cuts – voters want a state government that Alaska can afford. And they are correct in wanting this. Efforts in Juneau this year are focused predominantly on “new revenue;” fees, cutting industry incentives, new taxes, and increases to existing taxes. But while debates over these catch-what-we-can revenue initiatives are dominating discussion, they fail to address the budget crisis. Using the fiscal notes from the Office of Management and Budget, all new revenue measures combined generate $855 million. That’s enough money to fund State government for a little over a month. Alaskans are concerned about the other 11 months of each year. The Alaska Chamber believes spending must be brought in line while Alaska savings are still available as a resource. To that end, we support efforts to reduce the State’s operating budget to a sustainable level by creating an endowment model or similar framework to use Permanent Fund earnings to support essential services. Only then should we explore new, broad-based taxes, if needed.

471 West 36th Avenue, Suite 201, Anchorage, AK 99503 Ÿ (907) 278-2722 Ÿ alaskachamber.com

Alaskans are aware of the problem. They’re accepting of the necessary solution. They’re just waiting for leadership with the discipline and resolve to get the job done. Curtis Thayer is lifelong Alaskan and serves as president and CEO of the Alaska Chamber.

471 West 36th Avenue, Suite 201, Anchorage, AK 99503 Ÿ (907) 278-2722 Ÿ alaskachamber.com