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Episode 48: Alaska’s fiscal cliff

By KTVA Alaska 9:12 AM March 27, 2016

This week on Frontiers, we stare down Alaska’s fiscal cliff, to see what it’ll take to pull the state back from the brink.

Some of the highlights from this week’s show:

  • A trip to Dillingham for a look at one rural community’s budget struggles.
  • A round-up of former Alaska governors and lieutenant governors weighing in on the budget.
  • Two former Alaska mayors — Rick Mystrom and former Gov. Tony Knowles — tell us how they would steer the state away from debt, if they were in the driver’s seat.
  • KTVA’s political reporter Liz Raines looks at the history of the Permanent Fund and what its original purpose was.

An impressive array of Alaska’s most veteran politicians, from both sides of the aisle, are urging state lawmakers to take action now on a long-term budget fix.

That means more than cutting the budget, more than dipping into state reserves.

It could mean tapping the earnings of the Permanent Fund — resulting in smaller dividend checks — bringing back a state income tax, imposing a statewide sales tax and a range of other taxes and fees.

The task at hand for lawmakers: to arrive at a balanced combination of solutions that does the least harm. And that’s not easy, given the diversity of economies in Alaska.

For rural Alaska, where Permanent Fund Dividend checks are a main source of income for many families, smaller checks have serious implications.

In Dillingham, we sat down with Mayor Alice Ruby and city manager Rose Loera, who believe the state needs new revenues — that state budget cuts in municipal revenue sharing and other areas are seriously affecting life and safety in rural communities. They also believe rural Alaska will be hit the hardest in any budget fix, because they have fewer economic resources to draw upon.

Ruby and Loera say a state income tax makes the most sense for Dillingham, because most of the fishermen who come to Bristol Bay are not local and pay little in the way of sales taxes, bringing their groceries and supplies with them from the Lower 48. Plus, they say reducing Permanent Fund checks would impact local sales and result in less city sales tax revenue.

When I asked Ruby if she could remember a more challenging time in state government, she said she could — during the 1980s recession when the city had to close its library and could no longer afford a city planner.

“We had a lot of good residents. They stepped up. They created volunteer organizations,” Ruby said.

But the mayor hopes the city doesn’t have to go through this again, because it takes the city a long time to regain lost ground.

In some ways, while rural Alaska may bear the brunt of cutbacks, it’s the Anchorage economy that could feel the most impact.

Tony Knowles and Rick Mystrom shared their memories of the late 1980s recession – which, according to the State Labor Department, resulted in a statewide population loss of 40,000 by the end of that period.

Their main message: drastic cuts pull hundreds of millions of dollars out of the economy, jump-starting recession.

Both men have slightly different solutions to Alaska’s budget crisis outlined in separate Alaska Dispatch opinion pieces, which we elaborate on during our program.

A show devoted to fiscal woes can be a gloomy subject, but the optimism of these two men was encouraging. In some ways, it felt like I was sitting with two boys in a tree house full of ideas and energy. They had many solutions — and yes, none of them are easy, but they made a passionate case for taking action sooner rather than later.

We continued the conversation with Knowles and Mystrom on Frontiers in this Web Extra, in which I just stepped out of my traditional role as moderator and let the two men converse, for the most part, uninterrupted.

I know it’s hard to believe that talking about the budget can be fun, but it was a fascinating discussion. Be sure you check this out. It’s a reminder that we’re a lucky state — in which we can tap the wisdom of veteran government leaders on both sides of the political fence.

We’ll be doing more on this subject in the coming weeks and welcome any suggestions.

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