A representative from the Alaska Department of Administration told a few dozen Wrangell residents Wednesday that budget cuts will not be enough to close the state’s $3 billion budget gap.
Michael Barnhill gave a presentation on what Alaska’s fiscal future looks like in a time of low oil prices.
“Various folks said, ‘Well we just cut the budget. We’re missing $3 billion in a $4.9 billion budget, so let’s just cut the budget, and we’ll cut our way out of this.’ And so what would it take to do that?” Barnhill asked.
Barnhill said if Alaska laid off all state employees, closed all departments, closed all universities, laid off all professors and closed all the schools, it still would not be enough to balance the budget.
“This really illustrates what a tremendously profound structural fiscal gap we have in the state,” Barnhill said.
He said balancing the budget will involve cuts as well as new sources of revenue.
Potential sources of revenue for the state are modifying oil and gas taxes and credits, modifying existing taxes and adding new taxes, repurposing financial assets like the Permanent Fund, and creating a state lottery.
After explaining the revenue options, Barnhill walked the audience through an online budget model.
“The idea was to make it available to concerned citizens so that they could play with the various inputs into the state’s budget,” Barnhill said. “So by inputs I mean, what are our revenues, and what are our expenditures? And what do we have to do to those revenues and expenditures in order to balance the budget?”
Audience members decided to add a state lottery, a hefty sin tax, an income tax, a sales tax, and increase the corporate income tax and motor fuel tax. Those changes, in addition to some significant budget cuts, hardly made a dent in the budget gap.
Not until Wrangell residents reluctantly tapped the Permanent Fund earnings did the screen turn green, signifying a balanced, sustainable budget.
The Permanent Fund is currently worth more than $50 billion. Barnhill said the state pays out more in Permanent Fund Dividend checks than it does in its education budget.
District 36 Rep. Dan Ortiz was at the meeting, and he passed out surveys for Wrangell residents to weigh in on how they think the budget should be balanced.
“My job is to hear from you folks and to hear what it is that you’re thinking,” Ortiz said. “So when I go into this next legislative session, we’re going to be looking at these types of questions. And what I need to know is what it is that you guys want me to do.”
Ortiz said the legislature cut $900 million from the budget last year. In Wrangell, those cuts have already impacted education and ferry service.