This week, the Walker-Mallott Administration will release its fiscal year 2019 budget proposal. Ahead of that release, we wanted to provide a report card to Alaskans on budget reductions that have happened as part of this administration, as we have made significant reductions to streamline government and create efficiencies.
Beginning from the peak of 2013, the state budget has been reduced 44 percent (from $7.8 billion in FY 13 to $4.4 billion FY 18). This number does not include the $3 billion payment to the state pension system, although it does include cuts to the capital budget and oil tax credits.
The state operating budget has been cut $1.7 billion — or 27 percent — since fiscal year 2015. The $1.7 billion in cuts does not include reductions to Alaskans’ PFDs, or the one-time pension item. (Inclusive of PFD, the reduction would be $2.3 billion or 31 percent).
Here’s how the numbers breakdown:
• Operating Agencies (day-to-day spending to keep government functioning): down $500 million, or 22 percent. Some of these cuts have been replaced by increased fees, particularly when the public expressed a desire to preserve valuable government services such as when hunters and fishermen supported and increase in fees rather than a reduction in services. If an adjustment is made for these fee increases, the budget is still down 13 percent from FY2015.
These real reductions have had tangible impacts on our communities. Even with increased fees, funding for the Department of Fish and Game is down 14 percent. Funding for the Department of Education is down 18 percent. Funding for the Department of Public Safety and Department of Law has fallen $22.9 million, or 10 percent since 2014. Cuts to prosecutors and police personnel have hampered state and local ability to prosecute crimes, even as crime rates have risen and our opioid epidemic continues.
• Formula Programs (things like Medicaid): down $252 million, or 11 percent, While we expect that this area will increase in the years ahead, shifting costs to the federal government and making other reductions all while increasing access to Medicaid services so thousands of Alaskans can have access to healthcare is a major accomplishment.
Through Medicaid expansion (that makes up less than 0.2 percent of the state unrestricted general fund budget), over 38,000 Alaskans have access to healthcare. This access comes thanks to federal reimbursement dollars, not money out of the state treasury.
• State obligations like oil credits, debt payments and retirement: down $501 million, or 51 percent. These reductions are due to decreased spending of oil credits, and use of other funds to pay for retirement.
• Capital Budget: down $463 million, or 78 percent.
All of this has taken place with a backdrop of plummeting state revenues — down $4.8 billion, or 69 percent, since 2013 ($2.1 billion in 2018 vs. in $6.9 billion 2013). Since that time, we’ve also burned through over $14 billion in savings. That money from the Constitutional Budget Reserve and Statutory Budget Reserve (our “rainy day” funds) is almost gone, and local communities are receiving fewer dollars from the state than they did 20 years ago.
Generally, these figures represent unrestricted general funds — one of the four categories of funding that the state receives. These are the focus of most comparisons because it is the category of funding that hits the state treasury. The other three categories of revenue are restricted in use, and money saved in those categories cannot necessarily go towards reducing the deficit. Designated funds are typically for fees charged by agencies and are used to fund specific activities, while the use of other and federal funds is very narrowly limited (i.e., aviation fuel taxes must help maintain airports, and Medicaid dollars must be spent on Medicaid). Using these funds on another purpose would be illegal.
The governor’s budget to be released on Friday is designed to find common ground with the House and the Senate, and pursue solutions that we believe will work. By focusing on those areas where we believe everyone can agree, there is an opportunity to build our economy while building confidence in our state.
Gov. Bill Walker’s budget will balance the need to keep government efficient with targeted investment in a strong future for our state. Alaskans deserve it, and it’s time to pull together to make that strong future a reality.
Sheldon Fisher is the Commissioner of the Department of Revenue. Pat Pitney is the Director of the Office of Management and Budget.
