The way Walker sees it, Alaska had no choice but to radically restructure its finances — a change he has been pushing almost since he took office in early 2015.
“Everybody needs to participate in some way,” he told CNBC in 2016. “You know, like I say about the plan we put together, there’s something there for everybody to not like. There’s parts of it I don’t like.”
But there are no guarantees the gamble will pay off.
Standard and Poor’s analyst Timothy Little, in removing the negative outlook from Alaska’s debt, praised the move to tap into the Permanent Fund’s earnings, which he said “should allow for sustainable draws from the fund in future budgets.”
But he warned that Alaska’s dependence on oil — whether through taxes or the Permanent Fund — carries some big risks.
“The reliance on such economically sensitive revenues will likely make it more prone to future pressure,” Little wrote in his June 8 report. “The state’s rating could further benefit from economic diversification.”
Policymakers in Alaska talk a lot about diversification, especially when oil prices are low. But there is little consensus on how to go about it. As a result, Little said, the state needs to keep plenty of money in the bank.