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Governor to host discussion about state services, budget

By KTVA CBS 11 News 6:46 PM June 4, 2015

With turmoil in the Alaska Legislature, Gov. Bill Walker is looking ahead, hoping to avoid another fiscal crisis. The governor will meet with around 160 Alaskans in Fairbanks this weekend.

The three-day conference is called “Building a Sustainable Future: Conversations with Alaskans.” It starts Friday, June 5, at the University of Alaska Fairbanks.

Walker says the conversation will focus on two things: what kinds of services state government should provide and how to pay for those services long-term.

Walker says simply cutting more spending isn’t the answer.

“We know that we can’t bring in enough oil revenue to cover our costs, we know that we can’t cut our budget far enough to have a balanced budget, and we knew we had to do something different,” Walker said.

Alaska’s 2015 budget was based off oil prices of $105 per barrel. Already the state is short $1 billion, but then oil prices dipped below $50 a barrel.

The average price for the year was below $70 — numbers that University of Alaska Anchorage Institute of Social and Economic Research director and economics professor Gunnar Knapp calls a “crisis.”

“The future of oil prices matters hugely for us,” Knapp said. “Depending upon what happens to prices, our problem could be very, very deep and worse than we have been thinking of it, or it could be less serious.”

Knapp says unless big adjustments are made now, five years from now the state’s financial outlook could be dire.

“People have been saying, ‘Good news, the price of oil is back up to $60.’ Well, that is so far below what we would need to balance that it’s just highly unlikely that that would happen,” Knapp said.

Knapp says lawmakers have three choices: cut even more, raise new revenue like taxes or dip into the Permanent Fund.

All are unpopular, but choices he hopes will be discussed at the governor’s conference this weekend.

“It’s a question of do you make the hard choices now or do you make them later when you really don’t have any buffer at all?” Knapp said.

Even if oil prices were to rebound, Alaska’s budget is 90 percent reliant on oil. Knapp says it’s only a matter of time before counting on something so uncertain burns Alaska, yet again.

This weekend’s conference will be live-streamed online.

KTVA 11’s Bonney Bowman and Shannon Ballard contributed to this story.

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