Instead of beating up the Legislature for failure to adopt a new dividend formula to replace the 40-year-old one we can no longer afford, we should be thanking them for passing another balanced budget that provides a reasonable dividend without resorting to further cuts to public services or new taxes to pay for it.
Every other state would love to be in Alaska’s position of being able to afford to pay for state government services without sales or income taxes with enough left over to pay out a dividend to all of its residents.
The key to doing this is to continue to abide by the statute which limits our Alaska Permanent Fund spending to 5% of its market value. This limit gave us $3.1 billion in revenue to spend for the current fiscal year. Along with significant oil and gas income, we had $4.7 billion in general fund receipts to pay for services.
The bipartisan House Majority came together with a pledge to not overspend our permanent fund earnings. They accomplished that in spite of pressure to overspend for a larger dividend which would not be sustainable in the future and would require major tax increases or new taxes.
Imposing taxes (sales and income) just to pay for a bigger dividend doesn’t make sense to most Alaskans. Sure, if we need taxes to pay for critical state services like schools, roads, police and prisons — like every other state — that may be a necessity in the future. But why would we set up more expensive bureaucracy to collect taxes just so we can send out a bigger dividend check?
We should also thank those senators who feel strongly about the need to be fiscally responsible by not succumbing to the pressure to overspend today at the expense of Alaska’s economic future.
It’s tempting to say that because we had a good year of returns on the permanent fund, or that we are seeing a temporary spike in oil prices, that we can afford to overspend now. But as we know, investment earnings and oil prices are volatile and can go down as easily as they go up. An overly rosy assumption that our temporarily good revenue projections will last, and spending that money while it’s in our hands, is another likely path to more taxes in the future when the next downturn occurs or future budget deficits that could cripple our economy.
Let’s hope that next year, the Legislature will continue to be sensible and responsible with Alaska’s finances.
Carl Marrs is CEO of Old Harbor Native Corp. He previously worked at CIRI from 1973 to 2004, serving as their president and CEO from 1994 to 2004.