Alaskans have had a helluva run for more than four decades. We haven’t had to pay a state income or sales tax for all that time, and on top of it we’ve gotten a free check from the state every October since 1982 with no strings attached. We are no doubt the envy of every other state.

So why does it seem like our state government lives paycheck-to-paycheck? It’s because the incredible four-plus decade run of easy living has been catching up to us over the past several years and our “leaders” are paralyzed from making any tough decisions. Our budgeting and spending habits, revenue ignorance, and even the holy grail Permanent Fund Dividend (PFD) have all suffered because of our short-term thinking and desperate decision making is based on that next election cycle.

Who will suffer because of this weak leadership? Future generations of Alaskans. We’ve had all the tools and opportunities to make the right decisions but have failed miserably at every opportunity because we are more concerned with how decisions will affect us today rather than how our kids and their kids will be affected. This next election cycle is shaping up to be more of the same.

We have a lot going for our state, but there are some serious issues that will sink us soon unless a true leader steps up: revenue depletion, unrealistic spending assumptions, and the continued fantasy that a PFD will exist beyond this October.

Presently, we are down to two main revenue streams – oil and the Permanent Fund. I am not proposing a detailed solution to either issue here, but both need to be examined and adjusted to put Alaska on the right course for the next several decades.

Alaska has one of the most complex oil tax structures in the world. Models clearly show that, despite increased production from the likes of Pikka and Willow, we will actually see less revenue for decades to come. This is mostly due to the deductibility of capital expenditures for these new, very expensive projects. Nothing can be done under the current tax system. That is why it has always been important to pause and look back on whether the existing structure works for Alaska.

Re-examining where we are and if the current structure is working for both the state and the producers should not be feared or looked at as “attacking” the oil industry. I recall oil consultants and several legislators saying we need to “look under the hood” every decade or so to make sure everything is working properly. The last “look under the hood” was in 2014. Tthat was eleven years ago.

The Permanent Fund has been paying most of our bills since 2018 through the percent of market value (POMV) draws. Do I wish the decision makers had also addressed the PFD issue at that same time? Of course, and so do many of the legislators at the time. But they did agree on the POMV. Thank goodness they at least agreed on that part of the equation.

Whine, argue, complain, stomp your feet…do whatever you must in order to get it out of your system, but it’s time to move on. The courts decided the PFD must compete alongside all other spending decisions. I hate to be the bearer of bad news but if next year were not an election year, the PFD checks going out now would be the last PFDs ever.

But since getting re-elected will be priority number for many, I suspect they will wring out whatever pots of money remain (Higher Education fund?, Power Cost Equalization fund?, Alaska Industrial Development and Export Authority?) to give us our final PFD in 2026. This is not hyperbole. Lay the long-term revenue forecast next to the expenditure forecast. They go violently in different directions.

That brings us to the expenditure side of the equation. My thesis has been quite simple: our state budgets have been built and have grown over five decades funded exclusively with “free” money. Alaskans have not participated directly in funding state government since the income tax was repealed in 1980. The oil resource is certainly ours, and we have benefited tremendously from the production of that revenue stream. But the revenue picture has changed dramatically over the past decade yet our spending habits have not.

We have two choices – we need to put in place a “zero base” budget process to reset the spending plan for Alaska based on the new revenue reality we face. I will repeat my opening sentence… Alaskans have had a helluva run for more than four decades. We can no longer support the current budget, built on free money for nearly five decades, going forward. We are already seeing that the PFD has been pillaged for the past several years and will be gone completely next year. Then what?

Unfortunately, the second choice we have will be the one that will no doubt be forced upon Alaskans due to weak leadership and decision making. Broad-based taxes will be introduced to back feed the budget beast. However, we will quickly find out that we cannot extract enough revenue from our small working population to support this unrealistic budget behemoth. I’m afraid we will bypass a “recession” and sprint straight toward a “depression” before we are forced to cut programs and even departments to get back to fiscal sanity. A proactive approach by a true leader would have been the optimal way forward but instead we will be reactionary, which will lead to poor decision making.

Not long ago I thought we really had a chance to get the state on the right course for future generations. In fact, that’s why I agreed to become Governor Mike Dunleavy’s (R – Alaska) first Revenue commissioner. He was saying the right things regarding Alaska’s path forward and I have to admit, I fell for the sales pitch. He told me that he knew he’d be a one-term governor because making the tough decisions for his kids and all young Alaskans was more important than four more years in office.

We hadn’t been introduced to the term yet but he even put a “DOGE” team in place ready to reset the budget deck for generations to come. Unfortunately, the recall effort was introduced and he wound up completely backing off his original plans. So much for “making the hard decisions” for “future generations.” Just imagine how his federal level dreams could have unfolded had he stuck to his plan and really did have a “DOGE” like effort on his resume.

I reread that last paragraph several times, thinking it may be too harsh and that maybe I should tone it down. Maybe it is harsh, but I think we need to stop pulling our punches when it comes to the future of Alaska. We’re already hearing candidates for governor promise “full PFDs” and that they can solve the problem in a matter of months simply by “right sizing government.” We’ve heard all of this before. Some are even proposing “across the board cuts” to solve our problems. That is like putting a band-aid over an amputated finger. I’ve also heard some say that all we need to do is “unleash our resources” and that we can “develop our resources” to prosperity.

I have nearly fifteen years of experience working on the pursuit of a gasline and I’m sorry to say, we are no closer today than we were a decade ago. The reason we haven’t heard any updates on the gasline cost estimate is because it was wildly uneconomic over a decade ago when the “$44 billion” cost was originally developed. The true cost will be more than $70 billion, and unless the federal government writes a check for at least 90% of that cost, the project will never pencil out.

I want this to be a real project just like all Alaskans. However, when those that know better say we are practically “turning dirt” next week or even worse, we will have “first gas by 2027,” it leads the budget builders and Alaskans to falsely believe they do not need to be fiscally prudent since we will once again be bailed out. Let me be clear, we will not be awash in gas revenue in a few years. We therefore cannot allow ever-increasing budget decisions to be made based on this fairy tale.  

Back when I was the vice president & CFO for AGDC, I recall a conversation with then-Governor Bill Walker when he was pursuing the gasline with the Chinese. He enthusiastically told a group of us, “We are on the ten yard line.” My response to him was, ”I think we are too, but not the ten yard line you think we’re on.” Today I think we’re still on that same ten yard line.

Let me be crystal clear – within the next few years the Legislature and executive branch will be reaching into your pockets through an income tax or a sales tax or both. They won’t have any other choice because we are out of revenue options and as we’ve seen, supporting this massive budget has been and will continue to be priority number one for many of them.

The fiscal crisis we are currently facing will only get worse. All the “business as usual” candidates will end up failing future generations just as previous iterations have done. We need someone who will actually make the tough decisions and lead the state into the next fifty years. Accepting the fact that they will be a one term governor or legislator will be the cost for saving Alaska.

Bruce Tangeman has been an Alaska resident for 34 years and currently calls Anchorage home. He has served in a variety of leadership positions inside and outside of state government, including as Governor Dunleavy’s first Revenue commissioner. He has also served as vice president and CFO of the Alaska Gasline Development Corp., deputy commissioner for Department of Revenue, CFO of Doyon Utilities, and a fiscal and budget officer for legislative and executive branch divisions.