WATCH: Dunleavy's budget to focus on 'core services' of state government

Gov. Mike Dunleavy sits down with Channel 2 to talk about his budget ahead of its release....
Gov. Mike Dunleavy sits down with Channel 2 to talk about his budget ahead of its release. (KTUU) (KTUU)
Published: Feb. 12, 2019 at 1:08 PM AKST
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Focusing his budget on the core services of government, and building it from zero up, rather than cutting from what we have is Gov. Dunleavy's approach to his budget this year.

The governor is releasing his revised budget to lawmakers Wednesday, and gave reporters a preview of his priorities over the past weekend.

Dunleavy made a point to say that his administration is doing things differently in the past. “We’re building a budget from the ground up, as opposed to cutting one back,” Dunleavy said Saturday afternoon. “We’re not going to have a budget that’s going to have expenditure exceeding revenues. We’re running out of time for that.”

His philosophy behind that approach to the budget is focusing on what he says are the primary functions of the state: Public Safety, Transportation, Natural Resources and Education. “Those areas are expected of a state, many of them are embedded in the constitution, and most of those core functions touch Alaskans in one form or another,” Dunleavy said.

One of the topics not on his list of core government services: Healthcare. Dunleavy says while health care “no doubt” concerns individual Alaskans, his list covers what he considers core services. “So we’re not eliminating the health and social services department, but again we want them to manage what they have well," Dunleavy said. "But in our core services it’s basically in terms of education, management of resources, transportation and public safety, but we still have a functioning health and social services program that will be delivering services to Alaskans.”

Dunleavy also discussed the option of privatizing some services, and focusing on expenditures instead of revenues. Watch the full interview above. Here’s a transcription of the interview, with minor edits for clarity.

Channel 2’s Sean Maguire: Could you give me an idea of the philosophy of the budget?

Gov. Mike Dunleavy: We built the budget, we're doing things very differently than we've done them in the past. We're building a budget from the ground up, as opposed to cutting one back. So what we're doing is we're building a budget from the ground up based upon core services that affect most Alaskans. We're building a budget that's going to preserve what's left of our accounts, our reserves, like the CBR and the earning reserves. We're building a budget that's going to be smaller than no doubt the budgets in the past, but we're building a budget that's going to have expenditures meet revenues, we're not going to have a budget that's going to have expenditures exceeding revenues. We're running out of time for that; all Alaskans expect this issue to be solved hopefully this year, and that's the game plan, is to solve it this year so that we can put Alaska on the path of fiscal security moving forward. (Let’s) get this thing off the table so we can start getting folks to invest more in Alaska to create more jobs and grow our economy.

Channel 2: How do you build it from the ground up in practicality?

Gov. Dunleavy: You have to ask yourself what is a state’s primary function? What are the primary functions of a state: Public safety, transportation management of natural resources, education. We took a look at those because those areas are expected of a state. Many of them are embedded in the constitution, and most of those core functions touch Alaskans in one form or another, so we took those functions as the starting point from which we built this budget. So there might be things that won't show up in this budget that have been there in the past, and you'll see that on Wednesday the 13th, that may not have impacted all Alaskans, that may have only impacted a small group or a special interest over here. We are focusing on core services because of our revenues, but just as importantly we're focusing on core services to manage things better, and get better outcomes, is the goal.

Ch2: That list you had didn't include healthcare. Is that something you consider a core service from the state?

Gov. Dunleavy: It's certainly something that concerns individual Alaskans there's no doubt about it, but in building this budget the services I've mentioned are what we consider core services. Now, we have a health and social service program, and the folks in that program are charged with making it as efficient as possible in delivering the services to individual Alaskans who receive those health and social services benefits as best as possible. So we're not eliminating the health and social services department, but again we want them to manage what they have well, but in our core services its basically in terms of education, management of resources, transportation, and public safety, but we still have a functioning health and social services program that will be delivering services to Alaskans

Ch2: Gov. Bill Walker expanded Medicaid. That was challenged in court. Is that something you’ve looked at?

Gov. Dunleavy: We've looked at it, and you want to see the budget on Feb. 13th

Ch2: Is privatization a technique or a possibility you're looking into?

Gov. Dunleavy: We're not eliminating any possibility from making our government more efficient, delivering more services, under our budgetary scenarios. We're going to have more of a discussion about how we're going to deliver certain services going forward. You'll see more of that in the spring and summer. Right now we're focused on building this budget, working with the Legislature on this budget, but no, we're not going to take privatization off the table.

Ch2: What about selling state assets?

Gov. Dunleavy: It's a real possibility. I mean, I'll give you an example: We have a number of buildings, we have tremendous amounts of land, etc. Some of the buildings and structures that we own, we may be better off dispersing of those and selling those and getting rid of those as we consolidate and become more efficient at delivering services, so we're looking at every possibility to make Alaska a much more efficient state that delivers better services at a lower cost.

Ch2: One of the criticisms of privatization is that if you sell an asset, you can only sell it once but you don't have it again, or if it's managed by a private company, that the state then inherently has less oversight over the operations.

Gov. Dunleavy: It doesn't have to be that way. It depends on what you write into your contracts and what your expectations are. Taking what you just said into consideration, those things are being discussed, so it doesn't have to be that way.

Ch2: There are a lot of Alaskans who are nervous about this budget -- who are scared about services or jobs that may be cut. What would you say to those Alaskans?

Gov. Dunleavy: This budget has to be fixed. Everyone knows that. Everyone knows that we are running out of savings. Everyone knows that there is a structural gap between our expenditures and our revenues, and so, I've talked with many of those folks that are concerned as to what this budget's going to look like, but I've come across few that have said this should not be fixed. They understand that for Alaska's future, for our kids and grandkids, for potential investment that's holding back, for the overall health of the state, we have to get this fiscal issue under control. The past several years, 4 to 6 years, we spent $14 billion in savings that some would say we have nothing to show for. $14 billion is a tremendous amount of money that's gone now. We know we can't continue down this path. I ran on a platform in part to fix this problem. I'm determined to fix this problem. I'm going to do everything I can to fix this problem.

Ch2: When you were introducing your constitutional amendments, one of the aspects of why the tax amendment in particular should get passed is that you wanted people involved in the process and that you thought people should approve of a decision like a tax raise. Have people been able to give you the mandate to make $1.6 billion in cuts, and should they be involved in that process?

Gov. Dunleavy: Yeah, they will be involved in that process. That's the process we're embarking on now. That's how the process works here in Alaska, is the governor, by the constitution, develops and submits a budget. The Legislature then debates that budget, which they should -- that's their charge, and get input from the public, get input from everyone as to figure out what is really needed versus what is wanted. That's the public process, so the public will have public hearings, there will be public meetings, subcommittee meetings. This is how we do it in Alaska as they do in other states, so yeah, the public will be intimately involved in this process throughout every stage.

Ch2: Why, with the constitutional amendments, should there be a different process, say with taxes? Why should that be a direct vote by the people as opposed to leaving it to the legislature with public input?

Gov. Dunleavy: Because when Alaska has fallen into new revenues, historically speaking, if you’re looking at the history and the charts and the numbers, we spend it. The $14 billion is gone. Spent. The people of Alaska, I believe, should be part of the decision whether they want to open up their wallets to that process, or whether they want to tell us as politicians, we want to hem you in a little bit. We want you to focus on making the government more efficient before you go after our monies. This does not prohibit taxes. The politicians just have to convince the people of Alaska that they need a tax, so there's going to have to be more public process and more dialogue under my scenario with the constitutional amendment.

Ch2: You spoke about the legislative process and public input and that a budget will come back to your desk. Obviously, it’s very early, but if they don't contain the cuts that you expected or want, will the veto pen come out and start cutting items?

Gov. Dunleavy: So, we're producing a budget again that is building, not cutting. If -- your question is if the legislature adds programs and services and expenses that exceed revenues, we're going to get those expenditures back in line with revenues. We will not take any tool off the table to fix this problem, and if that includes vetoing, we will look at that, so yes.

Ch2: You spoke about wanting to get this done in a year. Currently in the session, there's been three constitutional amendments, four crime bills, and now a budget that you’ve described as vastly different to other budgets in the past. How, particularly with a divided House, how can all those things get passed?

Gov. Dunleavy: I'm under no illusion that it's going to be difficult, but it should be difficult, that's the process. It's set up to be difficult. But I believe that everyone knows, again, the urgency on fixing this problem sooner than later. We elected to run and we are now here because we were elected by the people. They sent us here to solve this problem, not duck and hide, not make excuses, not defer. We deferred for years, we lost $14 billion and countless opportunities. So I believe that message -- the people of Alaska will continually remind the Legislature and myself, they want this thing fixed. Certainly a divided house, certainly a divided Legislature makes the process a little more messy, but that's our process in this country and in this state. But I'm hopeful that with all the tools we have, both the Legislature and the executive, embedded in the constitution, that we can get this solved this year.

Ch2: You said you would make sure expenditures do not exceed revenues. Does that have to happen this year? Can it not be spread over say, two years? Potentially say the Legislature comes back and says 'we found $800 this year and next year we might see the same?

Gov. Dunleavy: I'm determined to get this fixed this year. That's what we're focused on. We believe it needs to be fixed this year. We believe that many of the legislators if not most believe it needs to be fixed this year. How that fix looks is up for debate with the Legislature, but again, we're looking at expenditures meeting revenues, existing revenues.

Ch2: Have you seen much buy-in from the legislature? Is there communication going on between this office and them?

Gov. Dunleavy: Well, you've got to remember, many of the legislators ran on the same platform I did: Fixing the budget, protecting the PFD and enhancing public safety, and I would imagine that their constituents are going to hold them to their promises. The biggest overarching issue here in this past campaign was really trust. The people of Alaska sent people down here that they hope, and they want to trust, will fix these issues. I'm determined to do it. I'm determined to maintain and foster that trust. I'm determined to fulfill my campaign promises, which -- nobody's told me they're unreasonable to fix the fiscal problem, to enhance public safety, to protect the PFD. The vast majority of people agree with that, that's why I'm sitting here. And that's why the Legislature's sitting here. So I would say that they're cognizant of that. They're trying to figure out a way, especially in the body, the House, to form up, but I'm convinced that they want this solved sooner than later. They don't want another failure, another couple years of failure, on their watch, and this is what people are telling me. So we'll see how it turns out, but we're determined to lead on this issue.

Ch2: So almost half the legislature did not get elected on that platform. They have constituents who elected them on different ideas.

Gov. Dunleavy: Did they run on an imbalanced budget? Did they go and part of their campaign was, ‘I am determined to run to make sure that this budget is not balanced, that I don't want to protect the PFD, and I’m not interested in public safety’ ?

Ch2: A lot of them say, from what they've looked into how the budget is at the moment, the math of it would mean that a lot of services would have to shrink or change.

Gov. Dunleavy: Expenditures -- expenditures will shrink. We're trying, and I think we've done a pretty good job at identifying those services that touch most Alaskans, and we believe that the budget that we’re putting forth protects those core services for most Alaskans. If there is a group that was a small group that was getting expenditures that was not considered a core service, that group may be disappointed in this budget. They may not have that funding in their program that we've had in years past. But again, we don't have the revenue for it, so that's the purpose of building this budget from the ground up using the core services.

Ch2: The Legislative finance division director David Teal spoke to the Senate Finance Committee and he said that the issue at the moment is not expenditures, it's revenue. You said exactly the opposite when you talked about your constitutional amendments. Who's right?

Gov. Dunleavy: I believe I'm right. How much revenue? What does it look like? What type of tax? What type of revenue? Who gets taxed? Who gets exempt? How does it increase? How does it decrease? The idea that you just put a tax in place and it solves everything doesn't make much sense to me. And the history of Alaska once again, is when we come into revenue, we spend it, and we grow programs. And then when that revenue falls because we are a petro state, the programs don't correspondingly fall or the expenditures don't correspondingly fall, so we access a new revenue source, whether it's to take the PFD or an income tax. Do we really believe, given our history, that we're going to be able to control our spending, history tells us otherwise. So I’d disagree with Mr. Teal.

Channel 2's Sean Maguire, Leroy Polk and Daniel Kirby contributed to this report.