Rep. Tarr & Sen. von Imhof discuss long-term investments in Alaska’s budget
Alaska is facing, by some estimates, a $1.3 to $2 billion budget shortfall heading into the new year due in part to a combination of low oil prices and the economic impact of the COVID-19 pandemic. As such, some legislators indicate that the budget will play a large role in the discussions amongst lawmakers during the 2021 legislative session.
In anticipation of that, Sen. Natasha von Imhof, Chair of the Senate Health & Social Services Finance Subcommittee, and Rep. Geran Tarr, member of the House Health & Social Services Finance Subcommittee, joined us at the 2020 Alaska State of Reform Conference for a review of the budget situation facing Alaska.
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Rep. Tarr, who represents District 19 in Anchorage, describes her district as one of the lowest income areas in the state. With her constituents in mind, Rep. Tarr points out that actions taken by the legislature often result in inequalities and favor those with more wealth.
“With wage inequality, with food insecurity, with homelessness, with expensive housing, there are just so many Alaskans who are feeling that somehow the system is leaving them behind,” says Tarr.
So far, the state’s go-to actions to reduce the budget have been to enact service cuts and reduce the Permanent Fund Dividend (PFD), says Tarr. She reasons that cuts to services are ineffective and points to the example of cutting preventative adult dental under Medicaid.
“The alternative when you don’t have preventative [services], is emergency room service. And so, the emergency room service is going to be the most expensive alternative. Cutting that service would not reduce the demand for services, it just means that service is no longer available to a group of Alaskans who need it,” says Tarr.
She adds that cuts to the PFD are also ineffective because it impacts some Alaskans who aren’t able to absorb the lost income, while others may not notice the cut at all.
Rather, Tarr says the state needs to take a different approach and first ask the question – how do we reduce the demand for services? She says the key is to begin thinking about prevention and long-term planning. While next year’s budget presents an immediate need that should be focused on, Tarr stresses that if the state began thinking about investments 5-7 years ago, Alaska would already be seeing the return on investment.
“We have been living, I think, under something that’s been very ideologically driven, that has been very crisis response driven, and that has consumed significant state dollars and put us on a path of unsustainability instead of sustainability,” says Tarr.
Tarr points to the return on investment in quality early education through better outcomes in education, health, economic productivity, and reduced crime, and as a result, a reduction in demand for state services.
Tarr says Alaska is at a pivotal point. Heading into next year, she says the conversation will have to focus on service cuts, long-term planning related to the PFD, but that it also must include long-term planning on prevention, early intervention, and investments in children and families.
“What does the next 50 years look like for Alaska? How do we have a strong state with a sustainable budget, a healthy population, and a strong economy? I see no path forward until we address these chronic, long-term social issues that are consuming massive amounts of state dollars.
Sen. von Imhof says budget discussions are about choices and philosophy. In 2019, the senator worked with a coalition of individuals and organizations focused on housing challenges. That year, they asked the legislature for $4.5 million for three years for a pilot project to build hundreds of housing units around the state. Some units would target individuals with substance abuse issues and include wraparound services, some would target those with low-moderate income, and some might assist formerly incarcerated individuals who need specific services.
“Well, we ended up not giving them the $4.5 million that year, and instead we paid out $1.1 billion in dividends that year,” says von Imhof. “So, it’s choices. It’s just philosophy.”
She points out that these decisions are playing out in the political arena where many incumbent legislators lost their positions and are being replaced by people who have signed a full PFD pledge.
“We can talk about reinvesting all day long and we can give people dividends, but without a house they’re really not having any place to pay rent to,” says von Imhof. “So, we have in our state right now a significant philosophical choice and there’s a fork in the road.”
Von Imhof says she will prioritize investing in job-creating opportunities.
“We have to leave some of our money aside that we find and invest it back in our state. And if we don’t do that, our state is going to implode from the inside,” says von Imhof. “So, I’m going to continue keeping a downward pressure on the budget, I’m going to continue investing in Alaska to things that actually create money, and create wealth, and jobs, and opportunities, and…continue to fund the services that are the highest and best use and do the greatest good for the greatest number of people. Because I think that’s what we can afford at this point.”