Crowds gather to protest proposed budget cuts by Gov. Mike Dunleavy (R) in Anchorage on March 26, outside an event organized by the Alaska chapter of Americans for Prosperity where Dunleavy was speaking. (Ash Adams/For The Washington Post)

It was an unusual scene for a warm March day downtown: a protest.

Around 300 people gathered on a closed-off stretch of street, hoisting signs decrying steep budget cuts proposed by Republican Gov. Mike Dunleavy’s administration.

“Kids not cuts!” read a few dozen posters, objecting to reductions in K-12 education. “Tax Us! We are not from Texas or Oklahoma,” read another, a derisive reference to a perceived oil-state hostility toward taxes that has trickled up from the Lower 48. Anchorage resident Joe Banta’s sign read, “Alaska doesn’t need billionaire Koch Corporate Carpetbaggers.”

The governor was traveling across Alaska last week to sell residents on his plan for deep budget cuts, including three constitutional amendments that would curb future government growth and require majority approval by voters on any new statewide taxes, cuts that are necessary to continue funding the state’s oil dividends paid to each resident, Dunleavy says. As he traveled, residents were showing up to register their disapproval. Crowds greeted lawmakers at committee hearings on the proposed budget, and protests — a relatively rare tactic in Alaska politics — were popping up outside budget events.

Standing on the bed of a pickup truck, Kendra Kloster of the advocacy group Native Peoples Action assailed potential cuts to the Alaska Marine Highway System, which people depend on in the rural southeastern island communities where she grew up.

“Save our ferries!” chanted the crowd.


Dunleavy has been traveling the state to sell residents on his plan for deep budget cuts. (Ash Adams/For The Washington Post)

Inside, Dunleavy and members of his administration explained the rationale for their proposal for almost two hours. “The plan that we’re putting forth is different from the status quo,” Dunleavy told the crowd.

The forum was organized and paid for by Alaska’s chapter of Americans for Prosperity, a national network of conservative activists funded by brothers Charles and David Koch. Americans for Prosperity is paying “$5,000 to $10,000” to hold similar events in other towns, according to Ryan McKee, the group’s state director. AFP and Dunleavy faced criticism after news came out they were restricting audience sizes and participation at the forums. McKee said that admission was on a first-come, first-served basis, and that caps on the audience size were not an attempt to shut the public out but are determined by the space in venues.

“We do smaller events where it’s more intimate, we get to more questions, and it’s really a discussion,” McKee said.

A former state senator, Dunleavy campaigned to the right of his predecessor, independent Bill Walker, who entered office in 2014 as the price of oil crashed, sending Alaska’s finances plummeting. Walker’s years in office were marked by deficit spending to pay for state services, trimming department operating costs, mothballing costly megaprojects and lobbying lawmakers to find a comprehensive fiscal solution, even if it included new taxes. Dunleavy was part of a Republican majority in the state senate that consistently rejected new revenue measures such as an income tax.

One of the central campaign issues was, and remains, the size of the Permanent Fund Dividend, the PFD. For decades, a share of the state’s oil wealth has been invested and a portion of those earnings is paid out to Alaskans each year. Dunleavy campaigned on a promise of restoring PFDs that his predecessor had limited to help pay for government services, and reverting to an older formula for calculating how much the annual transfer should be to each Alaskan.


Dunleavy speaks at the AFP event. (Ash Adams/For The Washington Post)

Under the governor’s proposals, this year’s PFD payout would be around $3,000 to each resident, along with the possibility of additional “back pay” over the next three years based on what the Dunleavy administration says was inappropriately withheld from Alaskans, a move that needs approval from lawmakers.

The PFD figures are at odds with the steep cuts to public services many in Alaska say are vital.

“Largest proposed budget cuts in state history,” said Dermot Cole, who worked at newspapers in Alaska for decades and now runs a blog. Cole criticized Dunleavy during the campaign for promising big PFD checks and a balanced budget, but giving an unrealistic picture of what that would cost residents in terms of services.

“It’s the point of view that says the only thing that matters in Alaska is the size of the Permanent Fund Dividend, that’s what’s wrong, because that’s not the only thing that matters,” Cole said. Cole says reductions would effectively eliminate the ferry services relied on by residents in the rural islands of the southeast panhandle.

Funding for the state’s University of Alaska System would be cut by $134 million, a hit that UA President Jim Johnsen warned would leave the institution “with no choice but to eliminate academic programs mid-stream, along with about 1,500 faculty and staff.”

Programs that benefit small rural communities in what Alaskans call “the Bush” stand to be severely impacted, many of them after several years of budget reductions.

“I think what we’re seeing this year is proposed cuts that don’t just cause harm, but compound harm,” said Tiffany Zulkosky, a Democrat in the statehouse from the town of Bethel, a hub for several dozen small, predominantly indigenous communities along the Yukon and Kuskokwim rivers.

Zulkosky is concerned about potential effects on education, Medicaid and public safety. Many of her constituents live in tiny communities without organized police or fire departments. In emergencies, there is rarely a first responder, and state police are often a plane ride away. Under Dunleavy’s proposed budget, a program to train and hire local public safety officers would be cut by 20 percent.

In the town of Nome on the edge of the Bering Sea, Mayor Richard Beneville shares many of the same concerns, and he’s also bothered by perceived opacity in the budgeting process under the new governor.

“I want to like Dunleavy, but I’ve got to be honest, I don’t like the cloak-and-dagger stuff,” Beneville said, adding that there was “something very un-American” about it.

Some of the proposals have alienated former allies of the governor. Two powerful entities representing residents in the Arctic Slope, the northernmost part of the state where most of Alaska’s petroleum is extracted, have bucked at a measure that could remove their authority to collect property taxes on oil and gas infrastructure. The tax revenue would be redirected from municipalities to the state’s general fund, and cost small indigenous communities in the North Slope Borough more than $400 million. That was a constituency that endorsed Dunleavy, but in a February letter, NSB Mayor Harry K. Brower Jr. wrote the proposal could upend good relations between residents and the oil industry.

The petroleum sector is one of the few areas spared in the governor’s proposed budget, without major changes in the tax credit system that is in place. The administration maintains it is protecting the state’s main source of revenue and the well-being of the private sector.

Joelle Hall, the state director of operations for the AFL-CIO, worries the arrangement jeopardizes the health of Alaska for the sake of the oil industry.

“It’s a pretty bleak vision,” Hall explained. “We’re basically saying we’re going to be an outpost of the oil industry, and we’re going to live or die on their success, and their success only.”

For his part, Dunleavy and those in his administration insist that dealing with policy nuances needs to take a back seat to structural fiscal revisions. They are looking at options that would consolidate, privatize or shrink services in the university, health-care and ferry systems, rather than eliminate them after this round of budget cuts. The guiding principle is that improvements in government services will follow spending cuts.

“You’re going to see investment flowing into Alaska like you’ve never seen before,” Dunleavy told the AFP forum audience. “And then we’ll be able to build a private economy like other states have done.”