Gov.-elect Bill Walker and Lt. Gov.-elect Byron Mallott both spent a few minutes with pep-talk speeches at that Friday night kick-off of the transition conference at the UAA campus, where words like “unity” and “cooperation” were bandied about. But, generally, if any of the 300 or so people attending the opening were expecting any kind of hopey changey thing, they were mightily disappointed.
The message: the price of oil has dropped precipitously, and we’re in trouble. As Amanda Ryder, an analyst at Alaska State Legislature, put it in a presentation, “It’s not looking like a pretty picture in the future.”
And whoever’s computer was used to project the slide presentations on the overhead apparently agreed. That person had chosen a screen saver with a picture of a serene forest, upon which were written the words: “One day you will die. You will be forgotten.” It was obviously a mistake, and was only up for less than a minute or so, but the person next to me, also squinting to see it, said, “At least they’re speaking some truths.”
Truths indeed.
At least 250 Alaskans, handpicked by Walker’s team, will spend the rest of the weekend divided into small groups, which are open to the public, discussing 17 topics, ranging from corrections to administration to natural resources. But much of the discussion will likely center around the fiscal crisis. The fact that the weekend is going to cost the state at least $150,000, might strike some as ironic.
However, every new administration does this kind of thing. It’s one way to generate good will and publicity. And, historically speaking, the ideas that are generated out of transition discussions are put on a shelf to gather dust. Indeed, Walker’s spokesperson told the Dispatch that the meetings are more to get conversations going than to serve as a “blueprint” for how Walker will govern.
The purpose, Walker told me, was to give the public a “flavor” of what he’s been hearing about.
After the pep talks, the rest of the evening was spent listening to presentations about how much fiscal trouble the state was in. All of the presenters were free to speak openly, and none of their presentations had to be cleared in advance.
Fiscal hawk Brad Keithley kicked it off by telling the crowd that the recent drop in oil prices from May, when it was trading at $105 per barrel, to today, when it was trading at $75, is akin to having a 40 percent drop in production, from about 550,000 barrels to 300,000 barrels. At this rate, we’re going to have to cut the budget by about $4 billion to reach sustainability.
Jonathan King, from the think tank Northern Economics, declared that we were already in a recession, and that it’s going to get worse, but that we should try to remain optimistic. How many were here during the crash in the 1980s, he asked. About three-quarters of the audience raised their hands.
The message, apparently, was that everyone survived. (Another message, though not likely intended, was that it was a pretty grey crowd.)
He said that building the big line would be a “game changer,” however, he warned the state “can’t let the perfect be the enemy of the good. Sometimes you just need a good deal,” he said.
Juneau-based economist Gregg Erickson talked about cutting the capital budget and said that in his analysis, the most “problematic mega-projects,” are: Juneau road; Knik Arm Bridge; Ambler road; and the Susitna dam.
All told, the state has spent $621 million on those projects, Erickson has said, and about $286 million has yet to be spent.
All of them have constituencies and cutting any of those projects is going to upset a lot of people. However, Erickson said, “the essence of political leadership is to do the tough things that have to be done.”
What was the takeaway for Walker? “We need a fiscal plan,” he said.
Contact Amanda Coyne at amandamcoyne@yahoo.com
Prediction: within 6 months this administration will be talking about accessing the PFD. At the same time no significant fiscal cuts will have occured.
Erickson, a resident of trendy Bend, Oregon, has always been against the road. He is a SEACC sort of fellow; anti-oil, etc. Yes, the ferries use oil but Subarus use gasoline and SEACC doesn’t seem to notice. Gregg knows that a salmon troller that uses a John Deere diesel is good but a logger using a John Deere crawler is nasty (causes global warming, etc).
This is the first time I have heard $4 billion as a deficit number. Mostly I have been hearing $3 billion. In any event, even the BSA and the state portion of Medicaid must be cut for Alaska to get out of this with minimum economic dislocation and yes, even tragedy.
The late-80’s recession was entirely caused by an abrupt drop in the capital budget. The operating budget was barely touched yet UHaul trucks and trailers headed to the Lower 48 in droves, record numbers of mortgages were foreclosed, and banks went out of business. So while the capital budget can and must take up some of the slack it would be a mistake to take a larger percentage from capital than from operating.
My prediction is that Walker will first try some smoke and mirrors budget cuts on the legislature. Unless he becomes OMB director (and Amanda takes his Leg slot – how fun), David Teal will yell fowl. Then the legislature will test Walker with their version of smoke and mirrors. Real cuts won’t come until the cash runs out. And how did Keithley’s foray into choosing legislators to win and lose turn out?