National conservative leaders are pushing for President Trump to take an ax to federal spending if he is reelected. This year’s ongoing Alaska budget crisis shows how politically unpopular that would be.
Alaska has been spending beyond its means for years. The state levies no statewide personal income or sales tax and instead relies mainly on revenue from oil production to finance its state government. In prior years, the oil riches were so great that the state could both afford to fund a standard array of services and to give each resident a check — “the dividend” — from earnings off of a $65 billion “permanent fund” created from decades of excess oil wealth.
That all unraveled this decade. Declining oil prices and production severely reduced state revenue. For the past few years, legislators and an independent governor have trimmed the dividend and drained the state’s budget reserve account to keep spending up. But the account is now running low, and state revenue has not yet recovered. Something had to give.
