The decision to reduce the PFD in 2016 in response to Alaska’s fiscal crisis will be one of the defining issues of this election. Our opponents on both the left and the right have criticized this decision. Some Alaskans believe that it was a terrible decision that we never should have considered -- that this decision was unnecessary, that if we had cut more out of state government, we could have avoided making any changes to the way we manage the Permanent Fund.
Other Alaskans believe that restructuring the Permanent Fund was an essential step to creating a long term fiscal plan and to making sure that the Permanent Fund and the Dividend could continue to grow for future generations.
One of the main reasons I ran four years ago was because Alaska was running a large deficit (-$1.6 billion) and nobody was talking about it. This gap between our spending and what we were bringing in could have been addressed by budget cuts alone, without a PFD reduction or any new revenue.
However, days after we were elected, the price of oil collapsed to $26/barrell, reducing state revenues by more than eighty percent. Alaska went from having the largest savings account in the country to the largest budget deficit of any state in the country (-$3.7 billion) … overnight.
In our first year, before we looked at any changes to the Fund, we went to work to reduce the state budget. We did not want to propose changes before we had cut everything we felt we could. That meant closing over 40 state facilities. It meant a loss of 77 positions at the Department of Public Safety alone (and that was the Department with one of the smallest reductions). It meant reducing the state spending by 44 percent, or $1.7 billion, from 2013. Ultimately, we reduced the budget down to 2007 levels, with state employment at its lowest level in fifteen years.
Additional cuts would mean hurting our schools. Additional cuts would mean cutting the people that keep our roads and airports running. Additional cuts would mean cutting our ability to fund troopers, prosecutors, and our response to the opioid epidemic. Additional cuts would mean cutting the things that keep businesses and workers invested in Alaska. Additional cuts would mean eliminating our state share of Federal grants that match our share up to ten times over. We will continue to look for ways to reduce the budget and spend our money smarter. But we are literally at the point where large additional cuts could cost us more money then they would save.
That's why, while you see both of our opponents advocating for "additional cuts", you won't see them specify where those cuts should go.
Alaskans knew that we could not cut our way out of the fiscal crisis we were in. The alternative was either make some changes, or just completely spend down our savings.
And that's what the Legislature chose to do. Rather than risk the political cost of change, the Legislature spent down $14 billion in savings. That's fourteen billion that we will never have back to invest in our schools, infrastructure, and public safety.
We were behaving like a guy who loses his job and decides to spend down all his family's savings before looking for a new job. We were about to lose the house.
At the rate the Legislature was spending down our savings, the Permanent Fund itself was at risk. Once we spent our savings, the only thing left to meet our debts would be the Permanent Fund earnings account, from which the dividend itself is paid out each year. That put the Dividend at risk of going away. Forever.
I reduced the PFD in 2016 because the Legislature had made it clear that they were not willing to be the first to take any action that would result in less money going out to Alaskans. I had Legislators tell me privately: "We're going to make you do what we should be doing."
I reduced the PFD in 2016 in order to leave that money in the Fund, so that it could continue to earn interest and grow the Fund, strengthening Alaska's greatest asset. Every dollar that I vetoed from the PFD stayed in the Fund.
I reduced the PFD in 2016 so that the Legislature would find the courage to pass a fiscal plan compromise. That compromise has provided the stability that businesses need to invest in Alaska. It has reduced our budget deficit by 80 percent. It has allowed us to forward fund education rather than pink slipping our teachers at the end of every school year. It has allowed us to bring on badly needed prosecutors and troopers in the fight against opioids.
Ultimately, I believe that the decision to restructure the Permanent Fund will allow both the Permanent Fund and the Dividend to grow long-term. That's what we saw this year, with the PFD increasing to $1,600, well above the historic average.
The decision to reduce the PFD was the hardest decision I've ever made. It impacted many Alaskans, no question about it. Byron and I believed that the alternative would hurt much worse, by endangering the future of the Permanent Fund and the Dividend long term. I didn't make my decision because it was "politically correct." My job as Governor isn't to be politically correct. My job is to put Alaska on the strongest path possible for the future.
If you have questions, let us know and we'll try to answer them. If this video and this information was helpful to you, please share to your Facebook page so other Alaskans can consider it as well. Thank you for taking the time.
I can't promise that you will always like the decisions I make as your Governor. But I can promise you that I will always tell you the truth and that I will always put Alaska's future first.