JUNEAU — In his 2016 State of the State speech to legislators Thursday evening, Gov. Bill Walker called for Alaska to “pull together” to solve the state’s unprecedented budget problem.


[Read Full Speech]


“Alaska is much more than a balance sheet,” the governor told lawmakers. “It is critical, however, that we balance the budget in order to reach our goals and dreams.”


Walker compared Alaska’s fiscal crisis to the 1964 earthquake he experienced first-hand as a child in Valdez, saying “Today, Alaska has been struck by an earthquake of a different kind.”


The price of oil, the soul source of 90% of the state’s revenue since the mid 1970’s is in steep decline.


“My fellow Alaskans, it’s time for a family talk,” said the governor. “It isn’t as though we weren’t warned of this day.”


Walker read a passage of a speech former Gov. Jay Hammond gave to the Anchorage Chamber of Commerce in 1976, in which Hammond said:


“While the time to pay the piper may well be 20 or 30 years away, if we continue to build a government funded primarily on one resource alone, what a terrible legacy we would leave our children.”


With a now nearly $4 billion budget gap, Gov. Walker walked through the key components of his long-term solution to Alaska’s fiscal crisis: spending cuts, a new approach to the PFD program, and new revenue to include an income tax.


“Working with the legislature, we cut $1 billion from state general fund spending this fiscal year,” said Walker, adding that as of October, the state has 587 fewer permanent employees.


“We are implementing a shared services concept the State of Ohio used to reduce the number of employees who do similar tasks for different departments,” he said.


The governor stressed that cuts alone won’t be enough to solve the problem. “The reality is if we laid of every state employee, it still would not make much of a dent in the state deficit.”


That’s why, the governor says, he’s introducing “The Permanent Fund Protection Act.”


Under the act, half of the state’s revenue from oil royalties would go towards paying permanent fund dividends to Alaskans, rather than being paid out of the earnings on investment from the Permanent Fund itself.


“If we adopt the entire plan, Alaska will still be the only state to pay a dividend check every year to residents,” said Governor Walker – urging lawmakers to pass the plan quickly. “If we do not take this critical step this year, our ability to close our budget gap becomes much more challenging.”


The governor repeatedly clarified that he will not cap dividends, and that pay-outs would only increase if the state achieves its gas line.


In reference to his proposal for an income tax, the governor said “We want out of state workers who commute back and forth to Alaska to contribute to the solution.”


The proposal would be based on federal income tax, the governor says would amount to “less than 1% the gross income for the average Alaskan.”


“None of the pieces of my plan are politically popular,” said Governor Walker. “I realize that.”


Walker referenced the downgrade in Alaska’s superior credit rating by Standard & Poor’s on January 5th, as further reason the legislature must act swiftly.


“I am flexible on the details of the fiscal plan,” said Governor Walker, “I’m not flexible, however, on our need to get there this year. It’s time to fix the hole in our boat.”


“Some of you in this legislature have already proposed bold steps,” said Governor Walker. “Alaskans can’t afford to wait.”


In conclusion, the governor said the night was not about “doom and gloom.”


“Tonight is about the incredible future that is in store for Alaska if we have the guts to take hold of the wheel with two strong hands.”


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