If our old friend and my mentor, the late Sen. Ted Stevens, was with us today he would have a short and direct solution to your extended deliberations. It would be “just do what’s right for Alaska.” And he might add a few expletives.
It’s past time for our governor and a majority of our state legislators to recognize the responsibility of each of them to represent the current as well as the long-range interest of Alaskans. This can only be done by making timely decisions based on sound and established financial principles.
This Legislature has been in session since January of this year. As of May 20 they are in a special session, and the governor has indicated his intention to call yet another special session beginning in August.
The inability to resolve our budget deficit and to propose to enshrine the dividend in the Constitution clearly points out the lack of discipline to separate sound judgment from political expediency. It wont be any easier in August than it is right now.
Let’s face the fact, folks. Alaska does not have the available funds to pay a dividend anywhere near the $2,400 which the governor proposes. To do so would be to curtail state services to a point of catastrophic proportions in education, health care, public safety, the ferry system, children’s protective services, Medicaid, etc.
To reduce the Realized Earnings Reserve Fund beyond the 5% of the value of the Permanent Fund agreed by the Legislature in 2018 to pay the dividend would be a mistake. We have already depleted our Constitutional Budget Reserve Fund. Once we start on the path of overdrawing the Earnings Reserve beyond the 5% of the value of the Permanent Fund we are on a path to no dividend and to no state’s share to fund state services. Just like dominoes.
To suggest that Alaska will pick up more revenue from the sale of oil is wishful thinking. Oil prices go up and down with the Mideast setting the world price because they control the excess supply and can quickly reduce supply and demand.
The state’s stock portfolio earnings can be affected as the U.S. economy and stock market fluctuates. The state could issue bonds to fund its deficit, but the bonds have to be paid back. Repayment must come from cutting the cost of government, growing the economy or new taxes. The feds don’t have that problem. They just print more money, and its called inflation.
The logic of enshrining the dividend in the state’s Constitution is in itself absurd. This could place the payment of any dividend before the needed services of the state to provide for Alaskans. The timing of this constitutional issue would also occur on the 2022 ballot, which is an election year for the governor and the Legislature. The governor and the Legislature have the obligation to identify how to fund government without jeopardizing the state savings account, namely, the Permanent Fund. The dividend is a legitimate benefit for Alaskans, but to repeat, only if our state government can afford it.
Unfortunately, that is not the case today. We have a deficit, even though we are cutting state services while taking more of the Permanent Fund earnings to fund state government. Almost in the same breath we are talking about increasing taxes. It is senseless to give away money as a dividend and then turn around and tax the same recipient — Alaskans — and then call it a revenue source. Some Legislators have suggested a tax based on a percentage of an individual’s federal income tax, but the truth is we have little private wealth in Alaska. The real wealth comes from the land’s production of resources. Alaska’s land is primarily owned by the federal, state, borough and regional corporations, and you can’t tax government entities.
Passing out free money (which the dividend is), certainly builds a political constituency. And as Sen. Stevens would say, “That’s not right for Alaska.”
Frank Murkowski was governor of Alaska from 2002 to 2006. He previously served in the U.S. Senate, where he served as chairman of the Energy and Natural Resources Committee from 1995 to 2001.