Cutting the State Budget – It Needs to Be Done
Last Friday, the state House voted to advance a budget that includes the confiscation of the majority of your statutory Permanent Fund Dividend. They do this because they are incapable of balancing our state budget, forcing them to steal your money to help out. For the average Alaskan family of four, the House plans to take $9,200 from you this year, which is a pretty substantial and regressive tax, but they believe it is required due to our bloated state budget and the legislature’s inability to govern responsibly.
It doesn’t have to be this way. Like private individuals who experience a reduction in income, our representatives in Juneau could focus on cutting spending to match our state revenues, but that would require discipline and making tough choices, decisions that politicians are loath to make.
In a previous article, I jokingly said to simplify things, the legislature just needed to go back and use the last budget that passed before the oil boom, as it only spent money on things that were truly needed. After giving it some thought, I decided to explore this idea a bit more. The last state budget passed before the oil windfall was the FY 1969 budget that took effect on July 1, 1968. We didn’t have much money back then, so it was a pretty frugal budget, and a good place to start when trying to reduce our current spending. Here is a comparison of the FY 1969 state budget with the one for FY 2026, which was enacted last June.
The chart shows the budget for each state department, and importantly, the costs in 1969 have been adjusted for inflation into 2025 dollars, so this is an apples-to-apples comparison. The column on the right shows the number of times each department’s budget has increased since 1969. The chart demonstrates that in real-world dollars, every department has dramatically increased spending levels. Importantly, while the population has gone up about 2.5 times since 1969, our total budget is 6.5 times what it was before the oil windfall, showing the extent to which it has grown.
Starting with the Department of Education, which seems to always be used as an excuse for the legislature when they want to spend more money. It received the highest funding in the 1969 budget and today still has the second-highest funding of any state department. Since 1969, spending on education has increased by a factor of three. Remember, these are using inflation-adjusted dollars.
The Democrat led legislature said last year and is repeating in the current session that they needed just a bit more money to fix the education funding problem. Examining the state budget, it appears that they have been making this claim for the past 57 years, with real dollar spending increasing threefold, yet we haven’t resolved the education funding problem by simply throwing money at it.
Education isn’t the worst of our problems. For the Department of Health and Welfare, our state now spends ~17 times what it did in 1969. A large part of this increase is due to Governor Walker’s expansion of Medicaid eligibility back in 2015. We now have over 280,000 Alaskans participating in Medicaid, which is almost 40% of the state’s population. Medicaid is a federal program that the state administers, intended to provide health care coverage to low-income individuals. According to the census department, 10.2% of Alaskans are considered “poor”, and yet 40% of us receive Medicaid funding, much of which is likely unnecessary.
This was a potential problem that Governor Walker was warned about at the time, but he flippantly said that if we ever got to the point where the program was too expensive, we would just tighten up on the eligibility. It looks like now is the time to do so.
If you examine the capital budget for FY 2026, you can see that it has increased fivefold. Unfortunately, we aren’t building new docks, roads, or bridges with the spending. One consequence of building large infrastructure projects in the past is the O&M costs associated with them. RINO Senator Bert Stedman proposes taking even more of your PFD than what is in the House budget to increase the capital budget to pay for deferred maintenance on K-12 schools in this state. Even though Capital spending has increased by a factor of five, Stedman says the state needs even more of your money just to take care of the existing infrastructure.
I could go on in detail about the bloated spending in every state department, but you get the picture. The problem with state government today is that our legislators figured out how to get elected by giving away the oil windfall and know of no other way to govern. That worked as an election strategy until the oil revenue started falling. Now our government needs to be more fiscally conservative, and they don’t know how to govern in that manner.
The solution to Alaska’s budget woes is not robbing the people by stealing an ever-increasing percentage of their dividend. The solution is simple but requires courage. The legislature needs to cut the budget, paring it back like you would a bush that has grown too large. If the current members of the legislature aren’t up to the task, perhaps it is time to replace a few of them.
Citations:
https://www.legfin.akleg.gov/Archive/FY69-70Statistical_and_Narrative_Analysis.pdf
I’ve said it before and I’ll keep saying it; we need budget reform. Yes, cuts. Deep cuts. But unfortunately, as anyone who’s worked in State government will tell you, cuts made within agencies are ALWAYS front line services cuts. Why? Make the “public” feel the pain. Encourage them to call their state legislators and demand full budget allocations!!! It’s a racket and until that’s changed, everything remains the same. Did you know as a State government employee you can be terminated for talking directly with your legislative representative about specific ways your agency can save the State money? Great system isn’t it?
The budget is a bi-partisan problem. I say throw out the 50 bums up for re-election. The people of Alaska would probaby come out ahead if we just drew names out of hat for our law makers.