As a legislator, I’ve witnessed firsthand the lack of a comprehensive long-term fiscal plan that has left Alaskans vulnerable to the whims of short-term budgetary decisions which result in negative economic consequences.
Businesses and investors shy away from investing in Alaska because of our fiscal structure and short-term focus.
What do I mean by fiscal structure? The state relies upon three sources of revenue: federal funds, oil revenue, and permanent fund earnings. This is our revenue structure. Each year the governor and the legislature convene in Juneau to decide how to spend anticipated revenue for the following fiscal year. This is our spending structure.
What is the problem, exactly? The current trajectory of state spending growth and reliance on the Permanent Fund Dividend (PFD) to balance the budget will soon consume the PFD, if alternative action isn’t taken. This is the equivalent of acknowledging the approaching cliff and proceeding over the edge anyway!
The state budget keeps growing to consume all available revenue. Our volatile revenue sources are not reliable because of periods of high inflation, low oil prices, and low permanent fund investment returns. When combined with greater-than-inflation growth of government spending, the result is fiscal uncertainty that threatens the economic well-being of our state.
Not only is it time to break free from this unhealthy cycle and establish a solid foundation for our state’s fiscal health, if we don’t choose to act now while we have options, we will be forced to act with fewer options when economic forces beyond our control (inflation, low oil prices, and low investment returns) force us over the cliff.
I’ve outlined a Four-Point Fiscal Focus that provides a roadmap for achieving this goal:
Ensure PFD Stability: By removing the PFD payment from the annual budget process and requiring its distribution by formula in law, we can provide Alaskans with the certainty they deserve. The PFD should not be a political football but rather a reliable payment to Alaskans. See (HB) 110 and (HJR) 7. HJR 7 will constitutionalize the payment of your PFD and is set to head to the House floor soon!
Economic Growth: Business tax cuts would stimulate economic growth to create a thriving environment for businesses to flourish. A vibrant economy is essential for the prosperity of all Alaskans. By streamlining regulations and making it easier to obtain licenses, we can foster a more business-friendly environment that encourages growth and innovation. See HB 109, HB 277, and HB 278.
Accountability and Efficient Spending: It’s essential to reform our state government management and budgeting practices to ensure efficiency and accountability. We must place a cap on government spending in a manner that incentivizes economic growth and reduce spending through systematic change to state government. See HJR 2, HB 38, HB 190, and HB 194.
Revenue Generation for Government: A low-rate broad-based sales tax would be far less economically disruptive than PFD cuts and will stabilize and diversify the state’s revenue sources. See HB 142.
The true solution that will allow us to stabilize our government and bring economic prosperity is through a long-term fiscal plan that includes these four policy reforms. We need to do it now, while we still have options and before we go over a cliff.
Ben Carpenter, Representative for House District 8, Chairman of the Ways & Means Committee. Contact Rep.Ben.Carpenter@akleg.gov, 907-465-3779 or https://bencarpenterpost.com/.
