Stock markets are in free fall, oil prices are cratering and the Trump Republican budget would eliminate health care for tens of thousands of Alaskans while shifting hundreds of millions of dollars onto the state budget. America as a whole now faces a serious risk of recession, and Alaska faces extreme risk due to the structure of our budget and dependence on oil revenue and federal investment.
Trump’s tariffs are causing a collapse both in stock value and oil prices. Alaska generates between a half and two-thirds of our annual revenue from Permanent Fund earnings, with greater reliance on our trust fund during periods of low oil prices. Under Alaska’s statutory spending cap, we rely on a 5% draw, averaged across the last five years of earnings. As a result, deep declines in stocks won’t bankrupt Alaska tomorrow but will create significant budget deficits as this market collapse drives down the five-year earnings’ average of the Permanent Fund. The drop in oil prices creates a more immediate crisis since each dollar of decline in oil revenue reduces state income by approximately $40 million. We’ve already lost $400 million in revenue compared to last year, and sharp declines in oil prices are making our dire fiscal situation an emergency. Each one of us with retirement accounts and index funds has lost a massive amount of money due to Trump’s reckless economic policies, but the financial impacts to the state will make our personal losses look small by comparison.
This state budgetary picture would be challenging if the federal government were maintaining its commitment to Medicaid, but the U.S. House of Representatives has advanced a budget that would cut $880 billion in Medicaid. This scale of cuts would eliminate health coverage for approximately 100,000 Alaskans and drive up the cost of uncompensated care by more than $60 million annually. Uncompensated care is the care that providers are required to provide but not paid for. Those costs are then shifted to privately insured employers — from contractors to oil companies to the state government. Large increases in uncompensated care will make Alaska businesses less profitable, erode the real value of Alaskans’ health coverage, and drive up state budget costs in the form of health premiums. The fate of Medicaid is in the hands of Alaska’s congressional delegation given the very narrow margins in Congress. Lisa Murkowski has strongly supported Medicaid, but Nick Begich cast the deciding vote to destroy Medicaid in the House-passed budget reconciliation bill. Just this week, Dan Sullivan cast the deciding vote to continue with $880 billion in Medicaid cuts in the Senate budget reconciliation package. Cuts of that magnitude would almost certainly shut down rural hospitals across Alaska, eliminate health coverage for tens of thousands of Alaskans, sharply increase maternal and infant mortality, and cut off funding for mental health and substance abuse treatment.
Beyond the massive impacts on people’s survival and our health care institutions, Medicaid funds medical travel. Along with Essential Air Service and Bypass Mail, Medicaid-funded travel is part of what allows rural air carriers to stay open and serve rural communities. With Elon Musk and his supporters targeting Essential Air Service and Bypass Mail, many of our rural communities face the real risk of losing most, if not all, air service.
For the last few years, infrastructure investment, expansion of oil exploration and development, and a strong minerals market helped Alaska. Now we face significant headwinds, including the economic ripple effects of haphazard federal layoffs that are harming industries ranging from fisheries to tourism.
Even before this cascade of threats from Trump and his allies’ agenda, we faced deep challenges with the state budget. We can barely afford a $1,000 PFD if we shortchange the capital budget, meaning increased future costs by delaying essential facility maintenance. If Trump and his supporters continue down the road of tariffs and economic devastation, we won’t be able to fund basic services and have any funds available for a PFD. While a growing number of Alaskans are advocating for a zero PFD, the political importance of the PFD in a handful of districts makes it difficult to pass a budget under these circumstances.
On top of all these challenges, the Trump administration has blocked or delayed energy projects across the state. From Kotzebue to the Railbelt to Southeast Alaska, a wide range of energy projects have been delayed or frozen. Considering the logistics of getting materials to Alaska, the costs of delay are massive, particularly, as in the case of Kotzebue, we miss a barge season due to mindless project delays created by DOGE bureaucrats in D.C.
Trump’s tariffs, frozen or delayed energy projects, Medicaid cuts and federal layoffs pose the most significant risk Alaska has faced since the deep recession of the mid-1980s. If our congressional delegation either can’t or won’t block Trump’s proposals, we as state policymakers simply don’t have the resources to protect our economy or Alaskans’ health coverage from the devastation being caused by federal decisions in D.C.
Zack Fields has represented downtown Anchorage in the Alaska House of Representatives since 2019, and co-chairs the House Labor and Commerce Committee.
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