By Shelley Hughes
Republican Candidate for Governor.

Let’s take a peek back at recent history. In 2016, Revenue Commissioner Randy Hoffbeck stated clearly in committee hearings in Juneau that the reason the Walker administration proposed a portion of the PFD be used to pay for state government was the belief that the PFD distribution represented “the largest financial asset with the easiest access.”

The Walker administration disregarded, or at minimum, downplayed the impact the PFD action would have on Alaskans and our economy. Although there are additional factors, it is no coincidence that since that fateful year of 2016, in the last decade, that Alaska’s GDP growth is 2nd to last in nation – at only 0.4%.

First and foremost, let’s acknowledge that the PFD was designed not only to ensure more equitable sharing of resource wealth and to function as a watchdog to protect the fund (as former Governor Hammond desired) but also to empower families and grow the private sector (as Nobel prize-winning American economist Milton Friedman advised).

It also cannot and should not be ignored that the growth of government expenses to unsustainable levels during the prior decade leading up to Walker’s infamous 2016 PFD cut only exacerbated the impact of balancing the budget with “the largest financial asset.” Not counting the $3 billion in paydown of unfunded pension liabilities, the budget had grown by more than 50% over that 10-year period. Yes, you read that correctly: 50%.

From 2016 forward, a majority of legislators every session voted to pass operating budgets that were too large, to burn through savings, and to pull funding from the capital budget and the PFDs to pay for the operating budget.

Modest but isolated, sporadic, and inadequate reductions to the budget also occurred during this time. Efforts to prevent growth beyond inflation occurred too, but no real work was ever done to address the underlying 50% spike in spending.

Nor has there been a concentrated effort to address the outrageous growth in the Medicaid budget due to the addition of working age, able-bodied adults to the rolls. In the U.S., one in five are on Medicaid; in Alaska, it’s one in three. Unsustainable, totally unsustainable. (As governor, I will focus on work training for better jobs for these individuals to get them off Medicaid.)

Add to this that special interest groups have greatly benefitted from the 50% increase, and that our economy rests primarily on one commodity: oil. We’re all aware that the annual overall oil revenue has declined compared to the early years. (Yes, we’re in the midst of high per barrel prices due to the Iran conflict but the volumes aren’t what they were during the glory days; the high prices are temporary.)

So, back to the PFD. In sum, the PFD is in meltdown mode because of 1.) the lack of fiscal discipline – allowing the 50% growth in the first place and then never going back to address it; 2.) the capitulation to intense pressure by special interests groups; and 3.) the reliance on one commodity, oil, or in other words: the absence of a diversified economy and more stable revenues.

For those of us here 20 years ago, let’s focus on the 50% budget growth. Please humor me and answer these questions:

• Do you recall a lack of government services in 2006?
• Did you have a sense in the early 2000’s that we were in bad shape, and to get things right, the state budget needed to be increased by half again?
• Do you remember during this period any public outcry that state agencies were failing Alaskans and needed their budgets sharply increased?

I don’t. And I bet you don’t either. When I recognized in 2015 the trajectory we were on, I issued a warning and repeated that warning year after year. The big-spenders, however, outnumbered the frugally-minded in the legislature every session. An all-at-once cut-the-budget approach by Governor Dunleavy was resolutely rejected in 2019 by the legislature.

And here we are. So what will I do as your next governor?

I will immediately order a thorough and transparent audit and establish the Sunset Audit Commission which will dig into the weeds agency by agency and draft legislation each year to ensure efficient operations, non-duplications, streamlined processes, cost-saving modern technology, and elimination of fraud. Reductions offered by the Sunset Audit Commission and passed by the legislature will not occur all in one fell swoop, thereby avoiding an economic crash. However, reductions will be steady, substantial, and consistent over time.

Speaking of fraud, 5 to 10 percent of state budgets are estimated to be fraud. Including the FY26 supplemental budget, Alaska’s total FY26 budget sits at about $15 billion. 10% of that is $1.5 billion. (Imagine if we pinpointed that amount of fraud – that would cover the missing portion of your statutory PFD, friends!)

As your next governor, I will also use the bully pulpit to advocate for a common-sense update to the outdated spending cap in the constitution.

I will also present two budgets to the legislature:

1. A mandatory budget (what is constitutionally and statutorily required)
2. A discretionary budget (everything else)

My commitment is to work to rein in spending and build the PFD back up through a stronger economy so the PFD isn’t an issue anymore, like it wasn’t for the first 34 years after its inception.

How? I will pull out the stops to allow our single-commodity economy to transform into a diversified economy through achieving cheap energy, putting Alaskan lands into Alaskan hands, and building needed infrastructure.

Instead of increasing taxes to raise revenue to cover the cost of state government, we will increase the number of participants in the economy which will provide a more diversified revenue stream to cover the cost of our roads, public safety, and education.

Some want an income tax to ensure there’s a PFD. I am not one of them and never will be. An income tax would result in less productivity and an exodus of workers; this would be a tragic mistake.

Court ruling or no court ruling, if the legislature chooses not to abide by and align with their own active laws or adjust them so there is alignment, then I will publicly advocate, directly communicate with Alaskans, to settle the matter of the PFD constitutionally to protect what was intended to grow the private sector from further raid.

In closing, gubernatorial candidates who imply they’ll make huge cuts right out of the gate in year one to pay a full PFD aren’t telling you that such a move would trigger an economic recession. They also aren’t telling you the chances are skyhigh that the legislature would block them. Honesty, a little integrity, would go a long way.

Candidates who may not say it out loud but plan to make sure there’s plenty of revenue for the budget and a generous PFD by raising taxes on industry and via an income tax aren’t being honest with you either. They aren’t telling you people will pack up and move, that investment and economic activity will plummet, and that young people will find no reason to stay in our state.

Candidates who campaign in support of a full statutory PFD without a clearly articulated plan are either ignorant or being deceptive – and either way, they are simply pandering for votes. I refuse to do this. The public should demand that candidates for governor directly tie conversations about future PFDs to solutions to the funding and cost of government.