Governor Mike Dunleavy of alaska and he will be speaking on the budget spending and what alaska can provide the nation as an example. Governor dunleavy was elected as governor of alaska 2018. Hes had a very very career in alaska since his arrival there in 1983 from working in a logging camp and in Southeast Alaska to pursuing his dream in an Education Career as a teacher. He has a unique insight into alaskas communities thanks to his two decades of service there. He also served five years as an alaskan resident so he knows alaska literally from coasttocoast and that provides not only a unique perspective on his state also what can we from the lower 48 can learn from classes example. As all this at the Heritage Foundation knows, americas Founding Fathers envisioned strong power between the federal and state levels of government. The constitution created a limited federal government and left much of the power of the states and to the people of the United States. But of course what exists today is that we have created a highly centralized federal government with states relinquishing much of their reserved powers into the federal government and also to federal funding. This is has allowed the federal government to become more involved in issues traditionally left to the states and local communities and is highly centralized government is a poor fit or a country as large and as diverse as america. Federalism should allow for 50 different models of governance suited to the particular needs of the nations individual states. And within the confines of the constitution, states should be free to enact policies that best serve the needs of their citizens and in this respect federalism fosters Competition Among the states and competition betweenstates encourages innovation and helps create a more efficient government. As a general principle the government closest to a problem should be the one addressing it in our humble opinion and for that reason we believe that congress should leave to the state any program that does not carry out the constitutional function of the federal government. Governor dunleavy will speak with us this morning about the successes that alaska has had in promoting federalism through budget discipline as well as what the federal government may learn from alaskas experience. And after the governors remarks, winfrey who is our director of the Roe Institute for Economic Policy studies will lead a further discussion the governor and also take questions from all of you so join me in welcoming governor Mike Dunleavy. Thank you for the kind words and its a real honor to behere today. I want to talk a little bit about alaska. Im a formerteacher , raise your hands if youve ever been to alaska but i wont. If you havent,. Folks like to go in the summertime, its a little warmer but its a beautiful state and i cant tell you how exciting it is to spend time with like minded friends in the capital. Every time i consider the difficulties of balancing alaskas budget im reminded it could be a lot worse. I could be taskedwith balancing the federalbudget. Thats the mother of all challenges. Thank you all for the work that you do in trying to accomplish imperfect goal, fiscal policy and other issues. To those of you i have not met yet my name is Mike Dunleavy, elected as alaskas 12 governor and wasthe first governor to be sworn in. We are of course the second youngest state in the nation just for reference. Candidate for president joe martin was about 60 years old when we join the union in 1959. And in nearly 600,000 square miles of land mass alaskas not just americas largest its one of the largest subcontinent of the western hemisphere. Over half of alaska is called the unorganized borough, i always around folks from texas that it lasted the four time zones, we are the furthest western state, furthest eastern state and as a matter of fact were so far west were closer to australia and california. I have a hard time getting their arms around that so half of alaska is called the unorganized borough meaning its residents live outside a burroughs form a government to being an alaskan term for county. So this creates a delicate situation for our policymakers. Were constantly striving to balance the priorities of our residents in acreage and servings with those who live out and sometimes the middle of nowhere. And then we have hundreds of smaller communities in census designated areas consisting of alaska natives and modernday immigrants. Only one member of our delegation was born in alaska. Of course i didnt come here today to recite alaska fax although i could do that for some time, i love that state. I came here to talk about fiscal policy, something ive been told interests all of you. I took office last december in the midst of a financial meltdown. After years of inaction, the deficit climbed to 1. 6 billion area to put this in perspective, our state spending in alaska is 4. 4 to 4. 6 billion so this was a significant budget deficit. And keep in mind were expected to bring in 2. 1 billion in revenue this year a deficit of this magnitude was an unmitigated crisis. It was also an entirely predictable crisis. In 2014 to 2016 the price of north slope plummeted from 110 a barrel to just 30 a barrel. From a peak of 4 billion state revenues collapsed to 750 million area rather than state face these revenue productions had on our leadership chose to increase ending during this time. Exaggerated revenue estimates and clever budgeting gimmicks became commonplace allowing appropriations to hide the true extent of the crisis from the public. This policy of inaction and deception proved to be an unmitigated disaster. The first time we were forced to dip into our oil savings account called the perimeter fund. Just keep the lights on. Meanwhile gdp growth stalled and alaskans became known as the worst state for business in america. I ran for governor becausei like most alaskans believed our states decline had to be reversed. There was simply no reason for a state this rich in Natural Resources and pioneer spirit to beconsidered the worst in anything. To this end i began my first term by directing my staff to publish a transparent and honest assessment of alaskas finances. No more deception, no more disinformation, no more time to stall. And with some of our state big spending politicians decided to ignore these warnings iutilized my veto power and cut spending by 650 million. This was the largest Budget Reduction in state history and a critical First Step Towards getting alaska back on track. My critics predicted doom. They figured alaska would slide off into the Pacific Ocean but they could not have been more wrong. According to economists, our three year recession is finally coming to an end, our gdp increased by 4. 1 percent last quarter, the second consecutive quarter of growth. Thousands of new jobs have been created across every sector of the economy and the private sector wagesgrew by five percent. We are projecting a 1. 1 billion increase in private investment on the north slope this year. Andalaska is so much going for it. In addition to this. A lot of people down here we call this the lower 48 believe our state is at a cold place with a lot of oil. Its true. But its only a sliver of the real story. I always tell folks alaska is americaand so much more. Its a place you can open a business complete with all the benefits and protections of a first world system of governance, america yet at the same time have access to vast untapped Natural Resources that simplydont exist outside of the third world. Im talking about the largest graphite deposit on the planet, a resource currently monopolized by china, mineral endowments of every precious and rare earth metal and mineral there is, an estimated half of the nations cold, the largest wild fisheries industry in the nation totaling 61 percent of all fish landed in the us, 1 7 of the nations timber although federal regulations have tragically crippled our logging industry leaving much of our timber to fall down. Its a wasted resource right now. Were also located quite literally in the center of theindustrialized world. This is often times a fact that people have a hard time getting their arms around as well. Our acreage in position with nine hours of new york and tokyo and serves as a gateway to the asianpacific market. In terms of cargothroughput , its second to the international airport, second only to memphis nationally and remains the fifth busiest on the planet. And its growing rapidly in terms of transport. And believe it or not, the airport is never closed. Despite falling as much as 6 million tons of each winter, alaskadoes a good job in dealing with it. Aviation is one industry we expect will be a big part of alaskas Economic Future. One in every 60 alaskans is a pilot, many who fly out of lakewood, the worlds busiest seaplane base, officially the faa has designated a portion of the arctic or unmanned flight research. This area is open to all and is being used by organizations like boeing and the university of alaska. Research has led to breakthroughs in pipeline and arctic monitoring. Plans are also in the works to connectalaska to alberta and the local 48 via railroads. 1500 mile railroads link opening a historic new trade route through asia inaddition to benefiting alaska refineries. In alaskas doors are always open to innovators and dreamers and you might have seen me reaching out to tesla, they had a testing ground in alaska and i wanted to invite him to come to alaska to learn how we produce resources in rare earth and how we do probably better than any other place in the world. These are the types of forward thinking people and businesses we are eager to collaborate with but despite my optimism for alaskas Economic Future challenge of balancing our budget has not declined. This year we faced a major shortfall of 1. 5 billion. Some of this can be traced back to the price of oil which is expected to fall 10 over the next few years and some of it is due to formula driven spending which increased by 89 Million Dollars this year including debt, pension payments and wishes totaling 160 million which is driving the budget upward. In fact over half of alaskas budget consists of formulas and obligations embedded in the statute. On wednesday i announced my plan to keep alaska on fiscally solid ground. This years budget consists of four overarching priorities. Maintain fiscal discipline, honor the law, tell alaskans the truth and fulfill the commitments i made to alaska when i ran forgovernor and these are just my priorities. The feedback ive received from folks across alaska, of course im preaching to the choir when it comes to maintaining fiscal discipline theres a real sense from my opponents that many people no longer understand the dangers of deficit spending. Much of it they attribute to the grieving influence of washington dc and a debt raising culture. Even in alaska sources like twitter help to amplify National Politics and that spending by both parties is commonplace. Borrowing back by the treasuries machine seems a little consequence. Unfortunately i have yet to find a machine to print money in alaska. Fortunately or unfortunately we are, we have to balance our budget. And the revenue funds which once told over 16 billion our savings accounts and 16 billion as of 2013 will nearly be depleted after this year as a result of deficit spending. And so this years budget represents the first in a 10 year plan to contain spending and cut the deficit. Most Government Services will be flat funded and there will be no net spending increase in the budget i rolled out. This is also a budget that will honor the law. Last year we had something called a Permanent Fund. It distributes dividends as well as saves oil wealth for future generations of alaskans and distributes an annual check to alaska and helps add a check and balance on government spending. The more money you save is constitutionally protected with opportunities for politicians to get their hands on and in recent years politicians have ignored our laws and diverged a portionof the dividend to fuel government spending. This is all wrong and its also bad policy. Ive yet to meet anyone who believes government spends money better than individuals citizens. I even believe that folks on the left dont believe this. My budget calls for a full statutory dividend plus repayment of last years reduced payoff but also secondly weve also fully funded education. Before joining the legislature i worked as a teacher. And later as a superintendent. Afterwards i spent a couple of more years as School Board President so im familiar with the struggles alaskan educators face both from the teaching and administrative perspective. We cannot move forward as a state leaving our children behind. But it cant just be about input, how much money you put into a system. It also has to be about output, how well are our kids doing . Finally ill be doing my best to change laws that are crippling our budget and as i alluded to, 55 percent of alaskas operating budget is now on autopilot spending. In other words statute laws are driving the spending and unless those laws are changed spending will continue. But i know you folks are fighting a similar battle at the federal level but if we want to fix the numbers we must change the laws. With flat funding and adherence to the budget will not be enough to balance in the years ahead. That brings me to another third priority, tell alaskans the truth. The boom years of 15 percent budget growth and over. Were facing deficits that are nearly the size of the general fund, historic deficits almost as big and actually in some cases almost as big and larger in many cases. Its time for everyone to get involved and that requires accurate physical information being made available to the public. Ill be flying all over alaska together forinput. To get aconversation started regarding potential scenarios. These include scenarios such as bigger Budget Reductions, changing the perimeter on the formula and a constitutional spending limit. Only through a constitutional spending limit networks will government truly have truth. Obviously my preferred method , if you paid attention to any news out of alaska recently , youll know that i always fight for Smaller Government and a bigger Permanent Fund payout for alaska but my team has gone to Great Lengths to layout unbiased scenarios in an unbiased fashion to make sure each alaskan has all the facts and their voices are heard as we plan. Which leads me to my next and most important priority, this is the budget that will fulfill my commitment to alaskans. Many may not be aware alaska is facing a crime epidemic. Per capita we are ranked the deadliest state in the country for women. Meanwhile a disastrous catch and release law led to hype property crime rates. I was elected with a mandate to make alaska safe again. And weve made great strides. Last year we hired more state troopers than any other year in the past decade. I signed a landmark prime bill cracking down on sexual predators and a broad arrayof other criminals. We funded the Shell Program at historic levels and clear the backlog of untested kits. This year, were expanding our efforts. My budget will pay for 15 state troopers and three prosecutors. The department ofcorrections budget will increase by 17 percent to cover population growth. Finally, the judiciary will be fully funded including additional funding for public defenders and guardians. Public safety remains my ministrations number one priority and the budget reflects that area so far we are pleased with the response of my budget announcement. The cuts we made last year were tough. But necessary and has remained serious wakeup call. But from what im learning alaskans are prepared to hold the line on spending. As you know standing alone i found it met necessary but never enjoyable so i very much look forward to collaborating with the legislature and the public on the budget process moving forward because at the end of the day , theres nothing more important to governing them fiscal policy. You know as well as i do the Financial Decisions we make today shake the word world our children will live in an is my greatest operation at the alaska i leave behind the safer and more prosperous than the alaska i discovered four years ago. And with that i want to thank you for allowing me to speak and id be happy to entertain your questions. [applause] we have a couple of mics in the room. Neil mccabe, one american news. You talked about your election but could you, theres a back story to what actually happened. That was a crazy openers race. Can you just sort of talk about that chain of events that landed you in this office which was a democratic wave here. Thank you. We are in governor was an independent. And were still in the race. At the same time former us senator mark, i was in the race, the three of us running. Governor Bill Walker just a month or so before the election actually dropped out for a host of reasons. The numbers werent looking good and so he decided to step aside so it became a twowayrace at that point. The result was that at the end of the election, we won the race 144 percent so we won by a good margin with the mandates and the agenda that we ran on. Thank you governor. Im jack spencer with the Heritage Foundation. You mentioned one of the issues youre facing is the regulations that keep your timber district frombeing all that could be. I was curious if you talk with the Trump Administration about getting some of those reforms. We know that deregulation is a big issue or the administration and that seems like a good place to start or a good place to continue, especially given some of the comments president has made regarding why those regulations have done west and in the lower 48 and what youve talked about that it does to your logging industry. Thank you very much. I went to alaska at a logging camp in 1984 and we have the Largest National forest in the country. We had a terrific industry. It was a high paying family wage industry and that industry was shutdown under the clinton ministration. A couple rules, couple regulations. You couldnt build any more roads and you could not harvest oldgrowth timber which basically killed the industry and as a result that industry died in Southeast Alaska and as we stand here today even though we have one seventh of the entire countrys entire timber reserves, rhode island has a bigger Timber Industry than alaska does. And having discussions with the Trump Administration, the president wants to take care of america, utilizing americas resources to make America Great so weve had discussions with the president. Ive been fortunate the president stops in anchorage when he goes to asia, its a refueling site and we talked about what to do and hes helped us tremendously in working with his secretaries and his administration to begin the process of rolling back those rules , rolling back the oldgrowth rule. As a result we are very hopeful that we will be able to stand up to the Timber Industry. It may not be as large as it once was but theres plenty of timber, 16 million acres of forest roughly and as you know National Forest is supposed to be used for multi use purposes. Its not anational park. We have lots of national parks, its a National Forest and we want to put alaska back towork. Even though our employment rate is at record lows its one of the highest in the country. Having a robust Timber Industry in Southeast Alaska would allow it to put people back to work, it will get people off of government programs. Also has the opportunity of load opening up to mining, we have a couple mines in Southeast Alaska and we also have rare earth minds so the president and his administration have been tremendous helping us with that and we hope to see the fruits of these efforts shortly. Good morning governor. Johnny ferguson and i live in alaska and dc. Nice to see you. We have a problem in alaska with keeping talented young fellas and women to return after their educational years and bring them back to the state. Part of it is jobs and part of it is just the change of attitude towards what sort of expertise do we need to bring back . Now that were dependent on the Permanent Fund, we need people more educated in the financial world with mbas and other sorts of Higher Education to help with those skills it will help us elsewhere in the state so i had this proposal which is like a whammy proposal where you let any alaskan a student loan for graduate work in the financial world, they come back and live in the state for three years and after that no matter where they work you forgive the loan so you entice them to come home. Ive got two gentlemen right here and i dont know if you rememberthis , dan cummings is from anchorage and has an mba on the university of anchorage. And ive had over my 42 years of lobbying here ive had district work and theyusually come in for two or three years. Charles christianson, you generation from anchorage , not returning area has an advanced degree from dartmouth and the job just wasnt there for him. Wyattperry , thirdgeneration of campbell lake, went to houston and got his mba at notre dame area we can get these back in so we need to entice them,what do you think of that proposal . Certainly we had a program in alaska where loans were forgiven for high need areas. Weve changed the way we do things at the University Area 15 years ago, we noticed we had a nursing shortage. And so we have emphasized nursing. Nursing programs at the university of alaska anchorage and thats been beneficial in providing more and more nursing candidates for the industry up in the state of alaska. There are things we can do to entice and keep our young people in alaska and thats what were all about is trying to build and alaska for not just his future for our kids and grandkids and so we looking at any and all programs. And the possibilities to keep and recruit big talent in the state of alaska. And as i mentioned one of the things that wewant to try to do is provide other economic opportunities. In developing our resources and intransportation. To believe we have a potential future in data farming in alaska. And youve heard of. About that point, etc. But alaska our resources, our energy but also we believe that we are positioned for the next 50 years in terms of our proximity to asia, that bodes well to bring more folks to alaska also keep talent in alaska though we continue to work on the programs and the ideas that you just mentioned as well as others to do that we recognize that when the lower 48 is doing better economically and then our young people leave, the chances of them coming back is slim because theyre going to be setting down roots in other places so these are the ideas that were looking at area. The premier fund spends 240 million in management of the fund and there might be as many as lets say 12, im sure there are more area firms in new york and elsewhere that could start an interim program for alaskans because theyre handling our money and its a natural way for these advanced degree people to get experience in the field. And they just do it. Theyre not doing as much anymore. This was an idea that was brought forward during the meeting in general and its easy for these guys. Its nothing for them to underwrite that program. Absolutely. Estes. Our unaccountable unaffordable part alaska had the highest per capita attention debt of any state and i was wondering what policies you were thinking of is a alaskas public Pension Program and save retirement for those employees. Obviously need to get funding and paying off our pension obligation and i think it was 2006. Alaska changed its pension process. It went from a definedbenefit process to a defined contribution process. So the definedbenefit process and in about 2007. But again, we still have obligations area we still have debt that we have to pay and in alaska once again, for folks that dont realize this, alaskacame into the union with a lot of these humans in the state. Its fast Natural Resources. Because the discussion at the time was alaska and the population to pay a broadbased sense of tax. So where am i going with this . We need to develop our resources. More and more youre being hamstrung by entities and groups outside of alaska to try and turn the state into a park but in order to provide new wealth, we need to develop our resources and with that new wealth we will be able to start more effectively pay down these obligations and so with the change of the process in 2006 2007 definedbenefit away from a defined contribution, and with our desire and our ability to produce more wealth through resource development, i hope we get a handle on that and get that paid down in a manner that keeps it under control and allows alaska to grow asa state. Good morning. My name isnot highly and im from the russian embassy. You spoke about the budget, but it is not only spending, it is also revenues and speaking about the foreign trade, what are your plans for cooperation and in particular the bering strait. The last part of the question one more time. What are your plans to build about on the cooperation of the bering strait. Very good question. So under your former head of the soviet union gorbachev, when the concepts of perestroika and glasnost were being implemented in the late 80s and early 90s there began a collaboration with the soviet far east. And it kind of withered overtime. That is an area that i think alaska would be interested in having a greater conversation as to how we can increase trade between russia and alaska. A lot of folks dont realize that russia is basically three miles awayfrom alaska. Its a small island so that the conversation i think thats worth having. Youre both a governor and an educator and before coming out we were talking about the us debt having reached 23 trillion and congress is in the midst of considering or beginning to consider a 1. 2 trillion Discretionary Spending bill. What messages would you have for congress within regards to dealing with our debt at the federal level. Drawn on your experience at the state . Thats a good question that may be one of the biggest questions. We are facing as alaskans and americans. Eventually the chickens will come home to roost. Theres no magical way to deal with growing budgets and overspending. Theres no magical way but the longer you wait, the longer you grow a superstructure of government in which a revenue having more and more difficult times supporting it, youre really pushing yourself, in this case the United States and in our case alaska into a difficult position. And thats something thats going to have to give as you cannot keep spending. And in a sense, in the Us Government you cannot keep printing money and expected to hold its value so from the alaskan experience, the sooner you get it under control, the better off your going to be. Not just for this generation but moreimportantly for our kids and our grandkids. And you need to tackle that issue. You need to grab that tiger by the tail sooner rather than later and go with it now. I made in south than when i ran for governor and i knew what i was going to get into. It was not going to be pleasant but i decided that i cared so much about the state that i was going to tackle these difficult issues and they are difficult but you need to do it sooner rather than later and you need to deal with this cold reality because right now what were doing is where embedding a culture of debt, lots of debt as acceptable and somehow someway down the future someone else or Something Else will take care of it and everything will work out well. Thats a view i think that needs to change sooner rather than later. Erin backs with the heritagefoundation. Just two quick questions. So a big problem in dc is mandatory spending, statutory spending that youre talking about. First question, are there any specific ideas you have on addressing mandatory spending from across the board and how to fix that instead of doing it on astatute by statute basis. Is there some concept youhave to address all across the board and the other thing is that when you have this much debt , are you gettingtons of pressure to increase taxes . Two good questions. We are going to have a discussion on our statutory items that we need to spend money on. Education, medicaid, etc. And we alsohave a discussion on how we want to manage our debt. Bond pension obligations. This is spending that keeps pushing against the ceiling and obviously creating an issue that i have no control over unless the legislature acts on it. Weve also introduced a spending limit and an appropriations limit. 1981 the people of alaska voted to put in a preparation limits into the constitution. Theycould see that spending was going to be out of control in 81. So they voted for that and it the legislature allowed the people to vote on that. One of went into the constitution and it was reaffirmed in 1986 tbring that spending down to about 4. 4, 4. 3 in the neighborhood of or . 3 billion area and an effort to contain. But you dont change formulas, what happens is you get a spending limit in place which is on advocating for, you have to sell sort of cannibalize your programs. In other words those that are not statutory protected, move money out of that to fund the items that are statutory protected so you have to do both. You have to have a realistic conversation. You have to lay out it is our debt, what are our obligations, what are the statutory obligations and show the people of alaska what that spending is read you also need to demonstrate to them the benefits of a functional pending so they can see that you can hand politicians in the two percent a year. But youve got to chillboth. You can do a spending, you can do spending revised spending limit in a difficult managed the overall budget when youre cannibalizing it. And so both have to be discussed and i think both have to be changed. How do you feel about the jones act west and mark. Thats a good question. For places like hawaii, puerto rico, alaska, its has the effect of increasingcosts. Im sure thats an issue that theyll be discussing downthe road , but it certainly increases costs for places like alaska. Understand the basis for it. To keep the ability for us to build our warships viable in the United States. But there is a negative for alaska on cost. Thank you. [inaudible] the Hudson Institute in washington dc hold a discussion with the Justice Department officials on us antitrust policy live today at noon er