Gov. Mike Dunleavy’s focus on a fiscal crisis is causing senators concern about the impacts on Alaskans who hunt, fish, and farm for a living.
Dunleavy’s FY 2020 budget would cut $700,000 in unrestricted general funds, and about the same amount in federal funds, from agricultural development programs. These include the popular Alaska Grown marketing program and a Farm to Institution program, which would supply local food to schools and hospitals.
Total funding for agriculture in the Department of Natural Resources (DNR) would drop by $3.2 million.
In a Senate Finance hearing Thursday, February 21, Fabienne Peter-Contesse, the Office of Management and Budget’s (OMB) administrative service director for DNR, said the Dunleavy administration believes that private industry will step in to fund Alaska Grown and other programs.
Is there a commitment from any businesses to take up that slack, asked Sen. Donny Olson (D-Golovin).
I’m not aware of any, admitted Peter-Contesse.
The budget also cuts the State’s dairy sanitarian, effectively closing Havemeister Dairy in Palmer, the only commercial dairy in Alaska.
The Food and Drug Administration (FDA) requires the State to monitor any dairy within its borders.
“That dairy will not be able to continue operating a system of commercial sales without the State operating a dairy program under the Pasteurized Milk Ordinance,” Jeff Rogers, OMB’s administrative service director for the Department of Environmental Conservation (DEC) testified.
Havemeister’s simple website proclaims, “We are a proud member of Alaska Grown.”
Rogers did not know how many gallons of milk the $180,000 budget cut would remove from the market.
The cut would require Alaskans who want local milk to participate in cow-share programs that sell raw milk.
Sen. Peter Micciche (R-Soldotna) noted that while Alaska used to grow 50 percent of its food, it now only grows four percent. However, there has been increasing interest in agriculture.
“It’s not the State’s job to grow potatoes, but the support that the agricultural sector has realized from the State, things are sort of starting to catch. When I think about the potential for diversification and, again, less Alaskans being dependent on the government, it seems like a tough time to be removing $3.2 million out of the agricultural sector in this state,” Micciche said. “Has that effect been evaluated, or were these numbers that looked attractive to remove from the budget?”
Peter-Contesse told Micciche, “Many of these are good programs, but in the context of our fiscal situation, is it the State’s job to support some of these programs, or should it be private industry’s job?”
Her response came after a lengthy opening statement from Senate Finance Co-chair Natasha von Imhof (R-Anchorage). von Imhof said that during the committee’s examination of department budgets, she has heard a trend in OMB testimony.
“I keep hearing the administration referring to this ‘fiscal crisis.’ We don’t have a fiscal crisis; we have a priority crisis. We have enough money to pay for a certain level of government, a certain level for a dividend. We just don’t have enough money to pay for both at the highest level desired,” she said.
von Imhof noted that Article 1, Section 1 of the Alaska Constitution guarantees a variety of individual rights, but also recognizes that “all persons have corresponding obligations to the people and to the State.”
“I am hoping that the conversation pivots away from the fiscal crisis message and instead pivots towards the conversations where Alaskans are asking ourselves, ‘What are our priorities and responsibilities as a State, as an individual, and as a community? And how do we strike the right balance to fully honor our constitution?’” von Imhof concluded.
One of the constitutional responsibilities to which multiple committee members referred is maintenance of subsistence rights.
However, Dunleavy’s budget would transfer two division directors in charge of subsistence research and habitat to OMB.
Samantha Gatton, OMB administrative service director for the Department of Fish & Game (DFG), said that DFG is exploring how these divisions will be structured and report to the commissioner’s office following the transfers.
“I think the cart is before the horse,” Sen. Lyman Hoffman (D-Bethel) commented. “Those questions need to be answered and adequately addressed before the move is made. I think that in the haste of reductions, a critical error in management in the proposal of this budget has been made.”
Tellingly, the budget eliminates a DEC economist charged with conducting an economic analysis before new regulations are enacted. The administration will submit a bill to match the budgetary change.
Cuts Likely to Hurt Commercial Fishing and Mining
When Dunleavy released the budget on February 13, he focused on natural resources as an area for investment.
However, the budget seeks to eliminate a series of revolving loan funds, including the Agriculture Revolving Loan Fund and the $1 million Charter Revolving Loan Fund (RLF), designed to help small businesses in natural resource development.
“That fund is not sustainable,” Gatton said of the Charter RLF.
It has been used to support commercial fisheries.
“Does the administration feel that we will at least maintain the economic engine that we have in the comm. fish industry throughout the state of Alaska?” worried Hoffman.
Gatton replied that DFG is exploring financial support for commercial fishing from NGOs, like the nonprofit Bristol Bay Science and Research Institute. That organization has provided support in the past, she said.
Hoffman said the State may not be able to rely on industry support if the budget is cut.
“They have serious concerns that the way that this budget is being proposed, they may not have the financial means because the profits from the resource that they receive may be reduced,” he warned.
Micciche, who chairs the DFG budget subcommittee, said he will examine the interplay of fund sources on hunting and fishing.
“I see more of a shift to local costs. We continue to talk about there not being new taxes, but we are shifting some of those costs locally. And the inability to prosecute those fisheries could make more Alaskans dependent on State services,” Micciche said.
The DNR budget would close recorder’s offices in Fairbanks, Kenai, Juneau, and Palmer, leaving only the Anchorage office.
Peter-Contesse explained the recorder’s offices are impartial places to establish a public record on deeds, mining, or other land issues. She said closing the offices reflects a trend toward electronic recording.
“You’re going to get some pushback from me on this,” Sen. Click Bishop (R-Fairbanks) told her.
Bishop noted that small miners often don’t have computers. In Fairbanks, they can quickly pay rent, engage with the Bureau of Land Management (BLM), and visit the recorder’s office in the same location.
Interior miners are not happy about the proposed closure, Bishop said.
Peter-Contesse replied that the administration has reached out to the Alaska Miners Association.
Elimination of Ocean Ranger Program Unlikely to Pass Senate Finance
Gatton announced that the State will no longer be managing Special Areas as part of the budget. Those include the popular Creamer’s Field in Fairbanks, McNeil River bear sanctuary, Palmer Hay Flats, Mendenhall Wetlands, Walrus Islands, the Delta Junction Bison Range, and the Matanuska Moose Range.
Gatton said that the administration will look for private donations and additional Pittman-Robertson funds to support the Special Areas.
Pittman-Robertson funds are the result of an excise tax on firearms and ammunition. When gun sales spiked following the election of President Barack Obama, the State had more of the funds than it was able to use, occasionally returning them to the federal government.
Senate Finance Co-chair Bert Stedman (R-Sitka) encouraged DFG to use them for things like boat ramps so they are not returned.
“We have a very diminished capital budget,” he cautioned. “We want to make sure that we maximize these funds that come in for our access to our hunting and fishing and things of that nature.”
von Imhof questioned whether a 50 percent travel reduction that has been applied to most departments is appropriate for DFG.
“Addressing travel in an agency that does a lot of field work and regulatory board support is a very complex issue,” Gatton acknowledged, adding that DFG is still evaluating the impact.
Another budget cut that got a cold reception is Dunleavy’s proposal to end the Ocean Ranger program created via ballot initiative in 2006. It charges four dollars per cruise ship berth to pay for water and air quality monitoring.
“The Ocean Ranger program is the only industrial permitting program we operate where the State mandates an on-site observer for compliance. We have thousands of discharge permittees throughout the state, both to air and water. None of those other permittees, other than cruise ships, have a requirement for a constant, 24/7 on-site observer. This change puts the cruise ship industry on the same platform as any other,” Rogers told the committee.
“I can’t tell you that there is not good work done by the Ocean Ranger program. I believe there probably is. I believe they probably see things and get them corrected. It’s simply a different standard than we apply to any other permittee,” he added.
The Ocean Ranger program brings in about $4 million, yet costs only $3.4 million to run.
“We do receive more revenue every year than we have the legislative authority to spend,” Rogers admitted.
The balance of the funds has been spent on what Rogers described as “marine-adjacent activities,” like fish tissue monitoring.
In addition to being self-sustaining, the Ocean Ranger funds are not part of the unrestricted general funds (UGF) used to calculate the deficit.
“The focus of this committee is going to be to deal with this budget deficit in front of us head on,” Stedman told Rogers. “In my opinion, speaking for myself, issues like this may be well intended, but they’re not timely to the burn rate of cash that’s in the middle of the table that we’re trying to slow down and then stop.”
Stedman told Rogers that the administration can submit a bill to repeal the program, but suggested it is unlikely to go anywhere.
“We can get bogged down in these things that don’t fix the problem, and it’s just going to get worse,” Stedman said.
Peter-Contesse said that OMB has kept presentations simple for the full Finance Committee to keep things moving, promising more detail in the subcommittees.
“In order to move quickly, I don’t want to have to reach for my calculator,” von Imhof countered.
von Imhof has served as a financial analyst, as well as the branch manager and commercial loan officer of a bank, while Stedman founded and manages his own investment firm.
“It just slows the process down; it doesn’t speed it up,” Stedman said of the oversimplification. “We have these meetings because we want… as many senators to get a broad view of this budget because of the magnitude of the reductions and the policy implications. This is not a normal budget cycle. That’s why we have had normally 60-70 percent of the sitting senators in this room.”
Stedman advised OMB that they shouldn’t rely on the same level of institutional knowledge when they present to the House.
Senate Finance will tackle the Department of Health & Social Services (DHSS) Friday, along with its $250 million cut to Medicaid.