Governor Bill Walker took several opportunities during a recent stop in Seward to tout what he says is a willingness to make difficult decisions, even if they are unpopular, the most well-known being his 2016 partial budget veto that cut that year’s Permanent Fund Dividend in half.
Walker, an independent, faces an uphill reelection fight against nominees from both major parties. The three-way race has invited concerns about a split vote among Democrats and comparison with Walker’s first bid for the governor’s seat, in which he and his future lieutenant governor, Byron Mallott, squared off against one another before joining under a unity ticket.
In a hybrid visit last Thursday that was part official business, part campaign stop, Walker spoke to audiences at the annual conference of the Alaska Association of Harbormasters and Port Administrators and to spectators at a town hall. He also signed a bill, Senate Bill 92, that aims to cut down on abandoned and derelict marine vessels.
At a campaign town hall held at the Seward Community Library, former Kenai Peninsula Borough Mayor Mike Navarre, now a member of Walker’s administration, introduced the governor and set the stage for his remarks, which would dwell on the state’s fiscal situation.
“Nobody wants to make tough decisions,” Navarre said. “The paradigm has shifted [in Alaska]. We have to start looking at broad-based taxes.”
Walker defended his administration’s aim of using some of the Permanent Fund earnings to pay for government services and argued that the state should continue to diversity its revenues – moving further away from reliance on oil and gas.
“We made the mistake of thinking that oil is a renewable resource, and that the price is always going to go up,” Walker said. “We lost focus for a while because the money was always there.”
In an interview with the Seward Journal, Walker made clear his feeling that the historic formula that had been used to calculate the size of the PFD would, in the long-term, draw from the earnings fund too heavily, comparing the money resource to another important Alaska resource: fisheries.
“We’re in a situation of overharvesting the dividend,” he said. “That could put it at risk for future years.”
In 2016, Walker cut the PFD nearly in half with a partial budget veto. The Legislature followed suit the following year, adopting legislation that cut the dividend to $1,100. The Legislature set the 2018 dividend at $1,600.
This year was the first time that Permanent Fund earnings – around $1.7 billion worth, according to the Juneau Empire – were used for a purpose other than paying dividends. The Legislature appropriated those funds to cover part of the state’s budget deficit.
If the price of oil stays above $72 a barrel, the state might make it through fiscal year 2018 without a deficit, according to Alaska Public Media.
Alaska’s vulnerability to volatility in the oil market is a common theme in Walker’s messaging, and that was true in Seward last week.
“Every governor gets to spin the oil wheel,” he said. “For Governor Palin it landed on $143. For Governor Walker it landed on $26.”
Numbers from the Alaska Department of Revenue show that crude oil prices hit a low of $26 for a brief period in January 2016.
“We were 90 percent tied to the price of oil in our economy,” Walker said of the state budget prior to reforms and cuts made by his administration after the oil price plummeted. Now, he estimates, the budget is only 30 percent reliant on the price of oil.