Monday morning, for the third time this year, the members of the Alaska Legislature were scheduled to gather to deal with unfinished business. Once again, the main issue lawmakers will be dealing with is the multibillion-dollar state budget deficit. But this time around, the picture is dramatically different. A series of targeted budget vetoes by Gov. Bill Walker have dampened the political ramifications surrounding restructuring of the Alaska Permanent Fund’s earnings reserve, as well as removed obstacles to a revenue compromise that the Republican-led majority and minority Democrats called impassable before.
Now there are no excuses and Alaskans’ patience with delay is exhausted. It’s time to chart a course to a balanced budget.
The first special session this year saw legislators pass a budget and oil tax credit legislation but stall out on the issue most fundamental to Alaska’s fiscal future: The restructuring of permanent fund earnings to provide for a reduced dividend and a stable source of income for government services. Though Gov. Walker’s plan, Senate Bill 128, passed the Senate by a 14-5 vote, it ran into trouble in the house, where many Republicans and Democrats lined up against it for different professed reasons. Republicans said they wanted more cuts to the budget many of them had just signed, while Democrats wanted to take another crack at just-passed oil tax credit legislation to reduce development credits to producers. An unspoken issue that was also clearly at play: 2016 is an election year, and the amount of rage generated by proposed changes to fund earnings in some quarters of the electorate is clearly a worry for legislators eyeing their prospects in October.
Seeing this, Gov. Walker acted to remove the political obstacles by taking the blame for them himself. He vetoed the payment of $410 million in oil tax credits and removed hundreds of millions of dollars in state spending from the budget. Most importantly, he reduced the allocation from the permanent fund earnings reserve by roughly half, taking responsibility for residents’ smaller checks this fall than they would have received otherwise. As a result, legislators won’t have the worry of political repercussions of reducing that allocation themselves. It’s time for them to get down to business.
While there has been plenty of inflated rhetoric on the budget issue, the math is simple enough: Cuts that would reduce the cost of government to match current revenues would not only devastate state services and put thousands of Alaskans out of work, there’s no way to close the gap through cuts alone. In a similar vein, the kind of personal taxes necessary to cover the gap through increased revenues would do great damage to the state economy and the household budgets of its residents. The only revenue measure that will go a substantial percentage of the way toward achieving a balanced budget is restructuring the earnings of the permanent fund. And far from eliminating the dividend as some falsely claim, this course of action is the only realistic way to protect it while maintaining essential state services.
Legislators know this, and they no longer have the political consequences of reducing the dividend themselves to worry about. It’s time for them to take revenue action that will protect the state’s services, its economy and the continued existence of the permanent fund dividend. There are no excuses.
—Fairbanks Daily News-Miner, July 10