Other issues including the development of state Natural Resources. From the Heritage Foundation, this is 40 minutes. Speak ladies and gentlemen please welcome the Heritage Foundation buys president ken holmes. [applause] its a nice rainy day outside and everybodys bunch together to keep warm. Good morning everybody how is everybody this morning . Welcome to the Heritage Foundation, its great to have you here. Its great to welcome mike dunlevy of alaska and he is guinness speak on the budget spending of alaska and what they can offer as an example. Governor dunlevy who was elected as governor in 2018. Hes had a very career in alaska since he was there in 1983 from working in a logging camp in Southeast Alaska to pursuing his dream in an Education Career as a teacher. He has a unique insight into alaskas communities due to his two decades of service there. He also served for five years as an alaskan senator there. So he knows alaska literally from coasttocoast. And that provides a unique perspective on his state, but what we, from the lower 48 learn from alaskas example. As all of us at the Heritage Foundation no, americas Founding Fathers envisioned a Strong Division of power between the federal and state levels of government. What we call federalism. The constitution created a limited federal government left much the power to the states and to the people of the united states. But of course what exists today is that we had created a highly centralized government. The states relinquishing much of their reserved powers into the federal government and also to federal funding. This is to allow the federal government to become more involved in issues that were traditional left to the states and communities. And thats highly centralized government has been a poor fit for 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, essay should be free to enact policy that best serves the needs of their citizens. In this respect, federalism fosters Competition Among the states and competition between states 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 congress should leave to the states any program that does not carry out a 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, our director of the Royal Institute for Economic Policy studies he will lead a further discussion with the governor, and also take questions from all of you. So now please join me in welcoming governor mike dunlevy. [applause] well thank you for the kind words, its a real honor to be here today. We talk a little bit about alaska. Im a former teacher i was gonna ask you that raise your hand if youve ever been to alaska but i wont do that. But if you havent, you silly to come up. It come up in the summertime its a little warmer and a beautiful state. I like to spend time with likeminded friends here in our nations capital. Every time i consider the difficulties of balancing alaskas budget im reminded that it could be a lot worse. I could be tasked with balancing the federal budget. Thats the mother of all challenges. I thank you all for the work that you do and try to accomplish that important goal. Fiscal policy and other federal issues. For those of you i havent met yet, my name is mike dunlevy and i was elected as alaskas 1h governor in the first governor to be sworn in north of the arctic circle. We are the second youngest state in the nation, just for reference. Candidate joe biden was about 16 years old and would join the union. In a nearly 600,000 square miles of land mass, alaskas not dissolute americas largest state but its also the largest subcontinent in perspective. Over half of alaskas called the un organize girl. I always joke around with people from texas because alaskas two nap times asylums of texas. We have four time zones where the furthers, the first northern state. We its a matter fact youre so far west we are closer to austerlitz than california. A lot of people have their hearts them to their arms around that. So over half of alaskas called the organized borough which means us outside the burrell government burrells is counties. So it creates a delicate issue for policymakers we are causally striving to balance our big cities with those who live outside in the middle of nowhere. And then we have hundreds of smaller communities in segregated areas consisting of a alice canadians of modernday immigrants. In fact one member of our congressional dam delegation was born alaska. Of course i did not come here today to review give you all alaska facts even though i could do it all a time. I came in to talk about fiscal policy and something i was told interest all of you. I took office last december in the midst of a financial meltdown in alaska. After years of inaction, the annual deficit had climbed to 1. 6 million. To put this in perspective, our state spending in alaska is approximately 4. 4 and 4. 6 millions of this was a significant budget deficit. And keep in mind we are expected to bring in about 2. 1 billion in revenue this year. So i deficit of this magnitude was a crisis. It was also predictable crisis. From 2014 to 2016, the price of north slope plummeted from one herndon 10 a barrel to just 30 a barrel. From the peak of 4 billion, state revenues collapsed to just seven or 50 million. Red rather than looking at these headon. They looked at increasing spending during this time. The estimated revenue and clement clever budgeting gimmicks became commonplace allowing the appropriations to hide the true extent of the crisis from the public. This policy of inaction and deception proved to be unmitigated disaster. For the first time we are forced to dictate into our oil wealth savings account called the premier fun just keep the lights on. Meanwhile gdt growth stalled in the last frontier was known as the worst state for business in america. I ran for governor because icom alike most alaskans believe our states decline had to be reversed. This simply is no reason for a state this rich in Natural Resources, and pioneer experience to be considered the worst in anything. To this end, i began my first term by directing my staff to publish the trades honest assessment of the less his finances. No more deception, no more disinformation, no more time to stall. And with some of our states big spending politicians decided to ignore this one, i utilized my veto power and cut spending by 650 million this is the largest Budget Reduction in the state history and a critical first step in getting alaska back on track. Critics still predicted doomsday. They figured alaska this was to be the end of alaska and it was just laid off in the pacific ocean. But they could not of been more wrong. With the economists are three recession is finally coming to an end, or gd t increased by 4. 1 last quarter. The second consecutive quarter of economic growth. Thousands of new jobs have been created across practically every sector of the economy and private sector increased by nearly 5 . We are projecting a 1. 1 billion increase in private investment on the north slope this year. In alaska has so much going for. In addition to this. A lot of people down here, we call the lower 48, believe our state is that place with a lot of cold displays and oil. Loads true but its only a sliver of the real story. I always tell folks that alaska is american and so much more. Its a place where you can open business, complete with all the benefits and protections of the first world system of governance, america. Yet at the same time have the access of the vast untapped Natural Resources that simply dont exist outside of the third world. Im talking about the largest lake graphite on the planet on the department. His been monopolized by china. Mineral endowments of nearly every precious and earth mineral earth minerals. An estimate half of the nations coal. The largest fisheries in the nation. Totaling 61 of all fish land in the u. S. One seventh of the nations timber, although federal regulations have crippled our logging agency leaving much of her timber to fall down and simply burn. Its a waste of resource right now. We are also located quite literally in the center of the industrialized world. This is often time the fact that people have all people get their arms around its wealth or to our International Airport in anchorage is positioned within nine hours of both new york and tokyo. It serves as a gateway to the asianpacific market. In terms of cargo input, our airport is second only to memphis nationally and ranked in the fifth busiest on the planet. Its growing rapidly in terms of its cargo transport. And believe it or not, the airport is never closed for snow. Despite plowing as much is 6 million tons of each winter. Alaska does a good job of handling snow. In fact aviation is one industry we expect to be a big part of economics future. One in every 60 alaskans is a pilot. Many fly out of lakewood, the world busiest seed plane base. Additionally the faa had designated proportion of the arctic for unmanned flight research. This areas open to all and its being used by boeing, bp and the university of alaska. Research there has led to breakthroughs in pipeline and arctic ice monitoring. Plans are also in the works to connect alaska to alberta and the lower 48 through railroad with 1500mile railroad link opening a historic new trade routes and benefiting alaskan refineries. In alaskas doors are always open to innovators and dreamers. In fact she mightve seen me reaching out about testing cyber checks. We have testing in alaska we went invite him to come to alaska learn more about how we produce minerals and how we dont probably better than anyplace 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 escanaba future, the challenge of balancing a budget is not subsided. This year we again had a major shortfall of 1. 5 billion poured some of this can be traced back to the price which is expected to spend followed 10 of the next years. In some of it used to formula driven spending which increased by 89 million this year, including dent debts and pension payments and resource switches totaling over 160 million which is driving the budget upward. In fact, over half of alaskas budget consists of formulas and obligations embedded in statutes. On wednesday announced my plan to keep alaska on physically solid ground. This budget has for arching priorities. They change physical discipline, honor the law, tell alaska the truth, and to build the commitments i made to alaska when iran for government. And these arent just my priorities, by the way, they are based on feedback i received from folks across alaska. These are alaskan priorities. Of course im preaching to the choir when it comes to maintaining physical discipline, but theres a real sense for my opponents that many people no longer understand the dangers of deficit spending. Much of this i tribute to the creeping influence of washington d. C. , and a debt raising culture. Even in alaska, sources like twitter help to amplify National Politics and debt spending by both policies is commonplace. Barring which is backed by the treasurys printing machine, seems a little consequence. Unfortunately, i get to find a printing machine to print money in alaska. Fortunately or unfortunately, we are, we have to balance our budget. In the revenue funds which ones were over 60 million our reserve funds, our savings account, 16 billion as of 2013 were nearly be depleted after this year. As a result of deficit spending. And so this years budget represents the first in a tenure plan to contain spending and cut the annual deficit. Most Government Service will be flat funded and there will be no net spending increase with the budget i have rolled out. This is also budget that will honor the law. In alaska with something called the permit of frost. Its a Commonwealth Fund that disturbs dividends as well as saved oil wealth for future generations of alaskans. This distributes an annual check to alaskans and as a check and balance on government spending. The more money you save, the constitutionally protected, plus opportunities for politicians at the hands on it. In recent years, politicians have ignored her laws and have diverted a portion of the dividend to fuel government spending. This is all wrong. Its also bad policy. Ive yet to meet anyone who believes government spends money better than individual citizens. I even believe the folks on the left dont believe this is possible. Budget calls for full statutory diffidence with blasters payoffs, and also, secondly weve also fully funded education. Before joining the legislature i worked as a teacher. And later as a superintendent for nearly two decades in arctic alaska. After words i spent a couple more years to school board president. So im intimately familiar with the struggles alaskan educators face. Both from the teaching and administrative perspective. We cannot move forward as a state while leaving her children behind. We cant just be about him lex. How much you put into the system it also has to be about outputs. How well our kids doing. How well is a system . And finally albedo my best to change laws that are crippling our budget. As i alluded to a few minutes ago, 55 of alaska operating budget is now on autopilot spending. In other words, statutes, laws are driving the spending. And. Laws laws are changed, that will continue. And i know you folks are fighting a similar battle at the federal level. If you want to fix the numbers, we must change the laws. The flat funding and they hear its the budget will not be enough to balance the budget in the years ahead. That brings me to the third priority. Tell alaskans the truth. The boom years of 15 budget growth is over. Its over. Were facing deficits that nearly the size of the general fund. Star deficit is almost as big its actually in some cases its almost as big as the money we receive in its larger. Its time for everyone to get involved and that requires accurate fiscal information made available to the public. Starting in january ill be flying all over alaska together folks together to get a conversation started about the potential scenarios for sustainable budget. These include scenarios such as major Budget Reductions, changing the Permanent Fund formula, and the constitutional spending limit. Only through a constitutional spending limit cap that works will government truly have signed five boards on spending. Obviously, all my preferred methods, if you paid attention to any news out of alaska recently, youll know that i will always fall fight for Smaller Government and the bigger permanent payoff or alaskans. My team is gone to Great Lengths h scenario and unbiased fashion to make sure each alaskan has all the facts and they can be heard. As we plan for the next decade. Which leads me to it my next and most important priority. This is a budget that will fulfill my commitment to alaskans. Many of you may not be aware but alaskas facing a crime epidemic paid. Capita we are ranked the deadly state for women. Meanwhile a disastrous catch and release law led to sky high property crime rates in a city center towns. I was elected with the mandate to make alaska safe again. And we made great strides. Last year, we hired more state troopers and any other year in the past decade. I signed a landmark crime bill cracking down on social predators, and a broad array of other criminals. We funded Domestic Violence programs and shelters at the historic levels. Emily cleared a decadesold backlog of unchaste Sexual Assault kits. This year, were expanding our efforts. Our budget will pay for additional 15 troopers, state troopers and prosecutors. The department of corrections budget will increase by over 17 to cover population growth and restored programs. And finally the judiciary we fully funded including additional funding for public defenders and guardians. Public safety, remains my ministrations number 11 priority in the budget reflects that. So far, ive been pleased with the response of my budget announcement. The custommade last year were tough, absolutely they were tough. And necessary. And for many a serious wakeup call. For what im learning alaska is prepared to hold the line on spending. As you all know standing alone on your principles is often necessary but never enjoyable. Side very much look forward to collaborating with the legislature and the public as a budget process ms. Ford. Because at the end of the day, theres nothing more important in government and fiscal policy. You know as well as i do fizzle policies of future policy. The Financial Decisions and make today directly shape the world our children live in tomorrow. Its my greatest aspiration that the alaska idly behind us be safer and more prosperous than the alaska i discovered over four years ago. So for that i want to thank you for letting me speak today and id be happy to answer your questions. [applause] weave a couple of mics in the room for your questions. State your name and where youre from and will open it to the group. Neil mccabe one american news. Seller if you talk about your election, but theres a back story to what actually happens. There is a crazy governors race, can use or talk about that chain of events that landed you in this office . Which was said to criminal democratic wave year. So our incumbent governor was independent and was still in the race. At the same time former governor was in the race the three of us are running. The incoming governor bill walker, just a month or so before the election actually dropped out for a whole list of reasons. The numbers were looking good, and so he decided to step aside. So became it to a race at that. And the result was that at the election at the end of the election, they said weve run the race 51 to 44 . So we won by a pretty good margin to implement the mandates and the agenda. Thank you governor, im jack spencer with the Heritage Foundation. You mentioned that one of the issues youre facing is the regulations that keep your Timber Industry from being all that it could be. I was curious if you talk to the Trump Administration about getting some of those reforms we know that deregulation is a big issue for the administration, and that seems like a good place to start. Or a good place to continue especially given some of the comments the president has made regarding what those regulations have done out west in the lower 48. And then what youve talked about what it does to your logging industry. Yes thank you very much. I first went to alaska and works in the logging camp in 1983. In Southeast Alaska we had the National Force which is the largest National Force in the country. We had a terrific industry. It really was a highpaying, great wage industry. In that industry was shut down under the clinton administration. They added a couple rules and regulations. You couldnt build any more roads and you could not harvest old growth timber which basically killed the industry. As a result, then industry died in Southeast Alaska, and as we stand here today, even though we have one seventh of the entire the countrys entire timber on reserve, rhode island has a bigger Timber Industry then alaska as a result of that. And having discussions with the Trump Administration as you know the president wasnt really take care of america. Utilized americas resources to make america great. So weve had discussions with the president , i have been fortunate that the governor stops when he goes to asia, its a refueling site. And we talk about what to do with congress and he has helped us tremendously. And working with his secretary, his folks and administration to begin the process of rolling back those rules. Rolling back the roadless rule, ruling back the oldgrowth rule. As if we hope we are very hopeful that well be just able to stand up to the Timber Industry. It may not be as large that once was, but there is plenty of timber, 16 million acres of forest roughly. As you know National Forest is supposed to be used for multiuse purposes. Its not a national park. Weve a lot of National Parks in alaska. Its a National Force. But we learned is put alaskans back to work. Although arla Unemployment Rate is at historic lows for alaska comment still one of the highest in the country. Having a roadless Timber Industry in alaska will put thousands of people back to work. It will get people off of government programs. I will also give us the opportunity for mining, we have some mining down the south. The president and his administration has been tremendous in helping us with that. And we hope to see all the fruits of these efforts shortly. Good morning governor, im jack ferguson, i live in alaska and 11 d. C. Nicu. So we have a problem in alaska with keeping talented young fellows and women to return after their educational leaders in the lower 48 to bring them back to the state. Part of it is jobs, and part of it is just a change of attitude toward what expertise we need to bring back now that we are dependent upon the permit from the people more educated in the financial world with mbas and other sorts of Higher Education to help with those skills down and you know when elsewhere in the state. So i have this proposal which is like a whammy proposal. Were you let any alaskan you give them the student loan for graduate work in the financial world, and if they come back and live in the state for three years, after that degree, no matter where they work they are free of the loan. And so you entice them to come home. Now ive got two gentlemen right here. [laughter] they both work. [laughter] theres a president ial scholar and grant cummings who is anchorage and has his mba from the university of fairbanks. I have had over my 42 years of law clover i felt people like this work for me is. They come in for two or three years. Charles christianson thirdgeneration from anchorage is not returning he has a masters route from dartmouth and the job just wasnt there for him. Lion perry, the third family generation on the lake went to houston got his mba from notre dame. We cant these guys back in, we need to entice them. What you think of that proposal . We have had a program in alaska where loans were forgiven for high need areas. Weve changed the way we done things at the University Like 15 to 20 years ago, we noticed we have a nursing shortage. And so we emphasized Nursing Program at the university of alaska anchorage. That has been very beneficial in providing more and more nursing candidates for the industry in alaska. In fact absolutely there are things we can do to entice and keep our young people in alaska. Ms that we are all about. We want to build alaska not just for this generation but for our kids and their grandkids. So were looking at any and all programs. And possibilities to keep and recruit good talent in the state of alaska. And ive mentioned, when things were trying to do is to provide other Economic Opportunities in developing our resources and transportation. We also believe we have a potential future in data. Data farming in alaska. I knew heard of folks talking about coin bit we look at our location on the globe we are with energy. But we think we are positioned in the next 50 years and our proximity to asia. I think were trying to bring folks to alaska but also keep talents in alaska. So we can work on the programs of the ideas that you just mentioned as well as others to do that. But we have to recognize that when the lower 48 is doing better economically than in our young people leave, the chance of them coming back is slim because theyre going to be putting down roots and other places. So what you just mentioned, these are ideas we are looking at. The premier fund spends 240 million in fees for management of the fun. And there might be as many as lets say 12, but im sure there are more firms in new york and elsewhere that could started Intern Program for alaskas because they are handling our money and its a natural way for these advanced degree people to get experience in the field. And they used to do it, theyre not doing it as much anymore. This was an idea that was brought forward during the sovereign wealth funds in juneau. Its easy for these guys. Its nothing for them to underwrite internships programs. Absolutely. Hi the affordable report has allies alaska with the highest pension debt is anyone in the state. What are their policies are thinking of to save alaskas Pension Program and save retirement for the employees . Obviously we will keep fighting and paying off our pension obligations. And i think is 2006 that alaska changed its pension process to go from an definedbenefit process to a defined contribution process. To the defined benefit process and it about 2006 or 2007. But again, we still have obligations and debts that we have to pay. In alaska, once again for folks who dont realize it, alaska came into the union and was allowed into the union as a state based upon its vast Natural Resources. Because the discussion of the time was in alaska had two small the population to pay a broadbased income tax. And so where my going with this . We need to continue developing our resources. More and more we are being hamstrung by entities and groups outside of alaska trying to turn the entire state into park. But in order to provide new wealth, we need to develop our resources paired with that new wealth, will be able to be more effectively pay down these pension obligations. So with a change of the process in 2006 and 2007 to divide benefits excuse me defined contributions away from benefits, with our desire and ability to produce more wealth, to resource development, its our hope we get a handle on that only pay that down. We hope to do that in a manner that keeps it under control and allows it to grow. Governor good morning my name is natan and i am from the russian embassy. You spoke about the budget, but it is not only spending its also revenues. And speaking about foreign trade, what plans have for preparation . And particularly the Bering Strait . The last part of question please. What are your plans on the cooperation of the Bering Straits . Very good question. So under your former head of the soviet union, gorbachev, when the concept were being implemented in the early 90s, there began a collaboration with the far east at that time. And it kind of went over time, thats an area that alaska would be interested in having a greater conversation to see how weakening increased trade between russia and alaska. A lot of people dont realize that russia is as small islands off. Get the conversation worth having. Siri are both a governor and educator. Before coming out we were talking about the u. S. Debt having reached 23 trillion. And congress is in the midst of considering, or beginning to consider 1. 2 trillion dollar Discretionary Spending bill. What messages would you have for congress within regards to dealing with our debt at the federal level, drawing on your experience of the state . Thats a good question. Hitler you were the biggest questions we are facing this as americans and alaskans. The chicken have to come home to roost in some form or fashion. Theres no magical way to deal with growing budgets and overspending. Theres no magical way, and sometimes is not painless but the longer you wait, the longer you grow the superstructure of government which revenue sadly is more and more difficult time supporting it, you are really pushing yourself, in this case the united states, in our case alaska, into a very difficult position. And that something is going to have to give because you cant keep spending, you cant in the sense of the u. S. Government you cant keep printing money and expect that the hordes value over time periods over the last experience, the sooner you can get it under control, the better off youre going to be. Not just for this generation but more importantly for our kids and our grandkids. And you need to take, you need to tackle that issue, and grab that tiger by the tail sooner rather than later and jill that now. I made a vow that when i ran for governor, and i knew it i was getting into, was not going to be easy. It was not going to be pleasant. But i decided that i cared so much about the state that i was willing to tackle these if the difficult issues. And they are difficult. And you need to go sooner rather than later. And you need to look at fiscal reality. Because what were doing right now is embedding but i think we are embedding a culture of debt, lots of debt as acceptable and somehow, somewhere, someone else is going to have to take care of it and if things can work out well. Thats a view i think needs to change sooner rather than later. Their impacts with the foundation, thank you for presenting. There are two quick questions. The problem here in d. C. Is mandatory spending, the statutory spending youre talking about paired my first question are there any specific ideas you have on the tracking the mandatory spending coming across the board and how to fix that instead of just doing it on the statue by statue basis, as are some concepts you have too tried to go across the board . On the other thing is you have this much of that, are you getting tons of pressure to increase taxes in alaska . Two good questions. We are going to have a discussion on her statutory items that we need to spend money on, education, medicaid, et cetera. We also have a discussion on how we want to manage our debts. Our pension obligations. This is spending that keeps pushing against the ceiling, and obviously creating an issue that i have no control over unless the legislator acts upon it. Weve also introduced a spending limits, and appropriations limit. In 1981 people in alaska voted to put an appropriation on the end of the constitution. They could see that spending was going to be out of control back in 81. So they are going for that and the legislature allowed people to vote on that. It also went into the constitution it was reaffirmed in 1986. The problem was of the formula that embedded in that spending limit for taking such a steep rate because spending back then, we would have to be spending 9. 7 billion and really spending 4. 4 now, to actually reach that ceiling. So what we need to do that spending limit of over advocating former pushing forgot this year, is to bring that spending down to about a 4. 4 to 4. 3 billion in an effort to contain that. If we dont change the formulas, what happens is you get a spending limit in place you have to sort of cannibalize internal your programs. In other words those that are not statutorily protected you move money out of that to funds the items that are statutory protected. So you have to do both, you have to have a realistic conversation and that so if talks about. You have to lay out what is our debt, what are obligations, when the statutory obligations and show the people of alaska with that type of spending is. You also need to really demonstrate to them the benefits of a functional spending task. So they can see that you can hand politicians and the 2 year end spending. Weve got to show both. You could do is spending, revise spending limit thats going to be difficult to manage the overall budget when youre cannibalizing to pay for those formulas. And so both have to be discussed and i think both have to be changed. We have time for one more question. How do you feel about the jones act sir . Will thats a good question isnt it . For places like hawaii, puerto rico, alaska, it has the effect of increasing costs. Im sure thats an issue that there will be discussions down the road. But it certainly increases costs for places like alaska. I understand the basis for, to keep the ability for us to build our specially our warships, but there is a negative for alaska, cost. Please join me in thanking the governor. [applause] s thank you so much for coming. [background noises] this week on the communicators we want to introduce you to jason oxman, president and ceo of the group called infma