Alaska has only one major source of income, big oil. But the barrel prices have dropped significantly. The governor calls it "an honest budget"

The governor of Alaska dealt a devastating blow to Alaska’s Native people in his proposed budget with unprecedented cuts to programs that have given life-changing opportunities for thousands of people across the state.

Alaska is currently overdrawn by $1.6 billion. The proposed budget is part of Dunleavy’s plan to trim the deficit by $1.3 billion. The plan includes cutting nearly one-fifth of the budget of the state Department of Education and Early Childhood Development, which include the university education system.

As a result, early childhood education and higher learning institutions face a struggling existence in the coming years, as some campuses may have to close their doors or make drastic cuts in order to survive.

In a state where rural law enforcement is nearly non-existent, some villages face uncharted territory in seeking solutions in an already dire situation – that of dealing with domestic violence and sexual assaults that puts Alaska near the top of the statistics ladder.

The Anchorage Daily News, in a Sunday editorial titled: Governor’s budget ax cuts deeper in rural Alaska, says that “Gov. Mike Dunleavy has chosen a plan that puts a disproportionate burden on some of the state’s most vulnerable residents — rural Alaskans — and that’s not right.”



The following are on the chopping block:

$300 million cut from K-12 education.

$3 million cut from the Village Public Safety Officer program.

Ending a hold harmless provision that allows 36,000 rural residents to get food stamps even if getting a Permanent Fund dividend would disqualify them.

Ending the Alaska Marine Highway system that allows rural people to travel.

Ending the fish tax revenue sharing program for small fishing villages.

Ending the Power Cost Equalization fund that helped villages reduce the high costs of heating oil and electrical power. Without the fund, the cost of power could jump more than 100-percent.

Because there isn’t a viable tax base in Alaska Native villages, of which there are more than 220, money for programs for the protection of women and children, have historically come from the state and the federal governments. Some projects and programs usually have a matching fund requirement and without it, these villages face a bleak future.

On Gov. Dunleavy's government site, the governor is cited with the following:

“Our budget was built from the bottom up. It was built around a series of core principles, most importantly the idea that expenditures will not exceed existing revenues,” said Governor Dunleavy. “The issues surrounding our budget and massive deficits has been a longstanding problem and Alaskans have demanded a budget that brings fiscal certainty and aligns spending with revenues. This is only the beginning, but we are determined to fix this budget this year so we can begin building a permanent fiscal plan for Alaska.”

Screen capture from the Governor's website.

“Governor Dunleavy’s budget uses honest numbers and does not drain reserves nor take dividends away from Alaskans,” said Office of Management and Budget Director Donna Arduin. “The budget he faced upon taking office had a $1.6 billion budget deficit. The governor is determined to balance the budget and not to repeat the past, where expenditures have exceeded revenues by over $16 billion dollars since Fiscal Year 2013.”

For An Honest Budget: Fiscal Year 2020 summary, click here.

For additional information on An Honest Budget: Fiscal Year 2020, click here.

Sen. Lisa Murkowski, R-Alaska, commented recently that the governor’s plan to get to an “honest” budget would mean less federal money in the long run. Other experts say it will take decades to recover from the governor’s misguided venture to balance the state’s bank account on the backs of students, women, and children. They also say the plan will only cost more money to fix in the future.

Julie Kitka, president of the state’s largest Native organization—The Alaska Federation of Natives, or AFN, which represents more than 140,000 Native peoples—about one out of every five Alaskans, said in a release that Governor Dunleavy’s proposed budget is contentious and ill-advised.

“The governor’s budget appears divisive by design, pitting Alaskans against each other and against industry at a time when just the opposite is needed. We don’t understand how this budget fits with the governor’s proposed constitutional amendments or with his stated priorities. This is not the solution for a fiscally stable future for our state. AFN looks forward to continued conversations with other Alaskans about building a fair and balanced state budget and exploring the question of what kind of Alaska they want to live in. Alaskans have come together many times in the past. With leadership from Alaska legislators and Alaskans across the state, a sound fiscal plan leading to a strong economy can be achieved,” Kitka said.

Alaska has only one major source of income, big oil.

Tanana Chiefs Conference President Victor Joseph said Friday there is going to be a major impact on the 39 villages in his region and tribal members. TCC is located in Fairbanks in Interior Alaska. “It’s going to limit our ability to respond to the needs of our people in law enforcement, healthcare, and education,” he said.

Joseph also said the state’s proposed budget cuts are unfair. “Money is being taken away from the rural side and not from urban areas.”

Oil companies are affected currently as oil was selling at $80 a barrel in September of 2018 and now the price of oil is hovering at around $50-$68 a barrel, between January and February 2019, which is not enough to pay for Alaska’s needs.

Alaska economist Larry Persily said in December 2018: “The absolute guarantees in life, right? Gravity is one. Oil prices are going to fluctuate. If I were to predict, I’d say long-term, Alaska prices are going to be in the $60 range, Lower 48 in the $50 range. Probably not going to get back up into the [$70-$80 range unless something happens in the world to change.”

According to the U.S. Energy Information Administration, projected Alaska North Slope oil production is at risk beyond 2025 if oil prices drop sharply. “Oil production on Alaska's North Slope, which has been declining since 1988 when average annual production peaked at 2.0 million barrels per day, is transported to market through the Trans-Alaska Pipeline System, TAPS. Because TAPS needs to maintain throughput above a minimum threshold level to remain operational, its projected lifetime depends on continued investment in North Slope oil production that itself depends on future oil prices. In the Annual Energy Outlook 2012 low oil price case, North Slope production would cease and TAPS would be decommissioned, which could occur as early as 2026.”

Alyeska President Tom Barrett said in the press release announcing the 2016 throughput, “More oil is the best long-term solution for sustaining TAPS, from a technical and operational standpoint.”

“Alaska’s declining oil output in recent years has not only stretched the state’s budget, it has also added a challenge to the functioning of the pipeline—decreased throughput means the pipeline is now about three-quarters empty, and crude oil flows are slower.

“The peak of oil flow through the pipeline was at 2 million barrels per day in 1988. Last year, throughput was 517,500 barrels per day, a 1.8-percent increase from 2015. This was the first annual increase since 2002, but still a far cry from the days of peak flow.

“Pipeline operator Alyeska is adding heat to keep the crude oil warm and to prevent water from freezing in the line. It also uses so-called cleaning pigs to keep the pipe free of wax. That’s because less oil means slower-moving oil, and slower-flowing oil means colder oil. “The challenges are immediate and ultimately may need to shift to intermittent flow,” Alyeska officials said.

John Tetpon, Inupiaq, is a longtime Alaska journalist, musician and artist.