Revak Report - March 2020

Dear Friends,

Thanks for taking the time to complete our survey and share your thoughts and concerns with me. I really appreciate hearing from neighbors and Alaskans like you.

While I have been responding to emails, I noticed that many of our neighbors shared similar thoughts and had similar questions. I have a few concerns of my own. So, I thought it might be best to include my thoughts related to the issues at hand in their entirety.

Currently the most pressing matter is the novel coronavirus, known as COVID-19. This is a priority concern for all Alaskans, especially as the number of confirmed cases increase in our state each day. Most of the cases are not from community transmissions within Alaska but are due to travel from separate impacted areas converging back in the state. The precautions we take must be measured and carefully executed. Rash actions rooted in fear will only amplify the challenges the virus presents. We have taken necessary preemptive action to minimize the impact of the virus by passing HB 206, which funds a total of $13 million to the Division of Public Health to confront the virus. In addition, the legislature is working to help Alaskans impacted by potential layoffs due to COVID-19 preventive measures.

This week we have all witnessed the significant drop in the price of oil and the stock market lose considerable value. This creates even more fiscal challenges than Alaskans were already facing. Our budget has been primarily funded by revenues sourced directly from the oil industry. These revenues rely on a healthy price of oil and volume of production, both of which have been dishearteningly low in recent years.

Our budget also relies heavily on the earnings of our Permanent Fund earnings. The Fund’s earnings rely on the health of the stock market. Due to a 30-year decline in oil production, past legislatures have allowed a percentage of the earnings (POMV) to be used, in part, to help fund our government. This means the stock market volatility makes our budget problems even worse. The bottom line is, low oil prices, low oil production, a declining stock market, and all the impacts of the corona virus leaves Alaska in a very difficult financial situation.

This year we face a $1.5 to $2 billion deficit. That means our bills are at least 34% more than our paychecks. In light of our state’s fiscal issues, we need to continue reducing the budget while we increase our revenues. While we have cut the overall budget nearly in half since 2013, the primary cut was the $2 billion capital budget. The most expensive agencies in the budget include Education and Health & Human Services/Medicaid. Finding cost savings in those agencies requires comprehensive programmatic policy changes in order to avoid severe consequences to students and sick people. We have a lot of work to do in order to achieve a rightsized government. However, the legislature learned last year when presented with a nearly $300 million supplemental budget to restore funding for the current fiscal year, we can’t just cut funding without big programmatic policy changes.

It is critical to our short-term future that we do what we can to incentivize an increase in oil production while we develop more long-term diversification solutions. I remain very optimistic toward production increases, given the explosion of capital investments in projects on the North Slope. In just a few short years, these investments will lead to real barrels of oil in the pipeline, increased production, and money for state programs and services we all need, like education and public safety. We must encourage the production of new oil to fill our pipeline and provide new wealth for Alaska - not throw down a roadblock of new taxes that will drive investment elsewhere.

We will also work toward long term economic diversification. Mined minerals have been and will continue to be very important in the world economy into the future. Currently, we mine several types of minerals in Alaska, but we just ship them out raw to foreign countries. It has been said to be too expensive to have factories here. I have heard over and over, one of the biggest deterrents to scalable value-added business growth right here in Alaska is the high cost of energy. The national average cost of electricity is $12.69 per kilowatt hour. Alaska’s cost is nearly double that, $22.90. This ranks Alaska as the second most expensive state to live in from a residential electric cost perspective.

I have come to believe that one of the first steps in attracting industry and new jobs to Alaska is to bring affordable energy to the rail belt. This is exactly why I was glad to support Senate Bill 123, which passed the Senate unanimously earlier this week. This is a big step toward reducing electric costs by promoting collaboration amongst providers, while we focus on amazing renewable energy potential like new hydro-electric infrastructure projects.

I encourage composure and resiliency as we face these hard times head on. Protecting and bolstering revenue streams, rightsizing government, diversifying the economy and leaving our kids an Alaska they can thrive in is what we all want. Combined, these efforts will move us toward a more sound, prosperous future.

While the budget and the coronavirus have taken all the air out of the room, we’ve also been working on everyday governance. Last year we focused a lot on criminal justice reform, this year we achieved an overhaul of the Title 4 alcohol regulations and continue to work on legislation concerning rural public safety, wildlife management, and the sanctity of ballot initiatives and a whole host of other important issues.

We have some tough decisions to make and economic hardship to bear in the months to come. You can rest assure that I will be working very hard for you and our neighbors in order to help point us in the best direction possible. While there is much work to be done, one thing is for certain - Alaskans are the strongest, most resilient, and kindhearted people on the planet. I have total faith that regardless of the challenges the state is facing, Alaskans will rise to the challenge and overcome adversity. Our best days are ahead and challenges like these will only make us stronger.

Again, I'm honored to serve and represent Senate District M, look forward to hearing from you during the session. Please email me, call my office at 907-465-3879, or visit us anytime to share you thoughts and concerns.