Voices of Alaska: Lawmakers know what needs to be done

  • By Ed Rasmuson
  • Sunday, August 27, 2017 2:47pm
  • Opinion

Dear Fellow Alaskans,

This is my analysis of the fiscal mess we are in. What I am about to share with you is my prediction of what will come about next session. I feel like Cassandra, “being able to predict the future, but no one is listening.”

Here is what is going to happen. By the way, these numbers have been reviewed and corroborated by the Governor’s budget office and Revenue Department and the Legislative Finance Division.

Total Fiscal Year 2019 general fund budget: $5.5 billion – this includes the operating budget to match this year’s level of services, state debt, a modest capital budget as well as the Permanent Fund dividend at this year’s amount.

The total general fund revenue that we can responsibly forecast is about $1.8 billion. If you subtract this from the total budget, you come to approximately a $3.7 billion deficit. Since we have essentially used up almost all of our reserves, we have to fund this deficit through a draw on the Permanent Fund. Technically, the legislature is allowed to draw down the earnings reserve. In my opinion, that is part of the Permanent Fund.

The Permanent Fund is about $60 billion, as of Aug. 11. A 5 percent draw is around $3 billion and a 6 percent is $3.5 billion. A 6.5 percent draw would take care of the deficit. We are going to be backed into this situation because we have no other alternative due to inaction by past legislatures.

Enacting various taxes, i.e. motor fuel, fish, mining, alcohol, will take a year to collect. Enacting a modest income tax will take at least a year to realize its potential. Reducing the budget to ‘right size the government’ is a real option but who is going to do this? Even if the budget was reduced by $200 million to $400 million over a two-year period, we still would need to seriously tap the Permanent Fund. As you may know, well-run college foundations are taking only 4 percent to 4.5 percent each year, the amount experts say is a draw that’s sustainable and allows for inflation proofing. As my father used to say, “Inflation is a thief in the night.”

Even if you can reduce the budget by, say, $400 million, you still have a deficit of around $3.3 million to fund.

What I am alluding to is that we have to come up with revenues and reductions in the operating budget. As some Alaskans say, “We have to right size the government before we institute more taxes – especially an income tax”. If the Senate or House cannot agree on reductions, I suggest that the legislature and Governor come up with a ‘Blue Ribbon Committee’ to make the necessary reductions – Alaska’s own BRAC Commission, the Base Realignment and Closure Commission that Congress established to help make those tough decisions.

By allowing ourselves to get into this situation, we are imperiling the corpus of the Permanent Fund.

So, I predict that we will take a 6 percent plus draw from the Permanent Fund next year with little reduction in the budget, along with much discussion on additional revenue sources and a further ‘kick the can’ approach, especially during an election year.

We know what has to be done. Many at the legislature know this and the Governor knows this. But, unless we can agree to agree, we will see a steady decline in the Permanent Fund with no solution in sight.

I hope I am wrong in my prediction.

Ed Rasmuson is a retired banker and lifelong Alaskan.

More in Opinion

Anselm Staack (Courtesy Photo)
Opinion: Dunleavy’s fiscally irresponsible and deceptive plan

Constitutions are about broad policy objectives and legal boundaries — not about the day-to-day.

New direction for the Tongass will help grow businesses, a sustainable economy

Now is the time to chart a new course for Southeast’s future.

Alaska Chief Medical Officer Anne Zink promotes getting immunized with the flu shot this winter. (Photo courtesy Alaska Department of Health and Social Services)
Immunize when you winterize

An annual flu shot plus the COVID-19 vaccine protects Alaskans and our health care system, too.

(Peter Segall / Juneau Empire File)
Opinion: Dunleavy’s first act as governor was unconstitutional

That’s according to a ruling by Senior U.S. District Judge John Sedwick.

This Aug. 3, 2021, photo shows Juneau International Airport.  The Federal Aviation Administration shared recommendations on Thursday for improving aviation safety in the state. (Michael S. Lockett / Juneau Empire File)
Opinion: How the FAA will improve the margin of aviation safety in Alaska

Alaska depends on aviation more than any other state…

Central Peninsula Hospital is seen in Soldotna on Wednesday, Oct. 13, 2021. (Camille Botello/Peninsula Clarion)
Voices of the Peninsula: Perspective of an educator in a ‘high-risk’ group, part 2

During some of the darkest days of my time in ICU, it was obvious where we all live is a special place.

Lawmakers havereturned to the Alaska State Capitol for a fourth special session. (Peter Segall / Juneau Empire File)
Opinion: Revenues should be determined before more PFD spending

The governor believes the dividend drives the entire calculation. Sadly, he has it backwards

Ronnie Leach. (Photo provided)
Point of View: For Domestic Violence Awareness Month, #weareresilient

At the onset of COVID-19, we expanded our services in a way to ensure COVID-19 consciousness.

Rep. Don Young talks during a June 2021 interview with the Empire. (Ben Hohenstatt / Juneau Empire File)
Opinion:Where’s Don Young when America needs him?

Once upon a time, avoiding political controversy was completely out of character for Young.

Peter Zuyus
Voices of the Peninsula: Seniors appreciate vaccination efforts

To those who have worked to encourage vaccination we say: Be proud, you are, in fact, saving lives.

Jackson Blackwell (courtesy photo)
Voices of the Peninsula: Carbon dividends are the bipartisan climate solution

By levying a gradually increasing price on carbon, U.S. emissions will be slashed by 50% in 15 years.

Gov. Mike Dunleavy holds a press conference at the Capitol on Tuesday, April 9, 2019. (Juneau Empire file photo)
Dunleavy: Facts Matter

Political opportunists care more about spreading political untruths than accepting the facts.