Gov. Mike Dunleavy says he will roll out a new plan to stabilize Alaska’s tumultuous state finances in the coming weeks ahead of next month’s legislative session. The upcoming session provides Dunleavy his last chance to address an issue that has vexed his seven years in office.
“(The) next three, four, five years are going to be tough,” Dunleavy told reporters Tuesday ahead of his annual holiday open house. “We’re going to have to make some tough decisions, and that’s why we will roll out, in a fiscal plan, solutions for the next five years.”
The state’s fiscal issues are structural. Since oil prices collapsed in the mid-2010s, Alaska has spent more money than it has taken in despite years of aggressive cost-cutting and a 2018 move to tap Permanent Fund earnings to fund state services.
Dunleavy said a boom in oil and gas drilling and growing interest in a natural gas pipeline from the North Slope to an export terminal will likely ease the fiscal pressure in the coming years. He said his plan would serve as a bridge.
“I think the next five years, we’re going to have to be real careful, and we’re going to have to have in place things that will pay for government,” he said.
Dunleavy, a Republican, declined to reveal even the broad strokes of his plan, saying he plans to hold news conferences in the coming weeks to discuss it.
Prior efforts by Dunleavy and the Legislature to come to an agreement on a long-term fiscal plan have failed.
Dunleavy’s early plans for deep cuts led to an effort to recall him. He has also backed attempts to cap state spending and constitutionalize the Permanent Fund dividend.
A prior Dunleavy revenue commissioner floated a few tax proposals during talks with a legislative committee in 2021, but Dunleavy has since distanced himself from those ideas. Alaska is the only state with no state-level sales or income tax, and asked directly whether his plan would include a sales tax, he declined to say.
“You’re just going to have to just wait a couple more weeks, and we’ll have that entire fiscal plan laid out, so you guys can take a look at it, and the people of Alaska can take a look at it,” he said.
In recent years, Dunleavy has proposed budgets with large deficits that require spending from savings. His most recent budget would have drained about half of the savings in the state’s $3 billion rainy-day fund, the Constitutional Budget Reserve, or CBR.
Still, Dunleavy says he wants to find a sustainable fiscal path forward for the state.
“We are determined to help solve this longstanding issue of, how do you deal with balancing the budget, and not just on the backs of the PFD or the CBR — what other methods are we going to employ to be able to do that?” he said.
Whether lawmakers will be receptive is an open question. Democrat-heavy bipartisan coalitions control both the state House and Senate, and even some minority Republicans crossed over to override Dunleavy’s vetoes repeatedly this year.
Dunleavy’s budget proposal is likely to offer some clues about the governor’s fiscal plan. He has until Dec. 15 to unveil it.
