Paradoxes Plague State’s Fiscal Debate

The summer has seen a lot of effort going into defining the discussion of how to solve Alaska’s fiscal problems. Alaska has a roughly $3.5 billion deficit to address and no easy fix in sight.  Do we tax, cut,  or use the Permanent Fund somehow?  Are there other solutions or some great combination of these that fill the hole with the least pain possible to Alaskans?

Those questions have been the subject of efforts on several fronts around the state to define the issue the way various interests want it defined.  

  • The Governor brought in folks from all over the state for a high profile “Dialog” in Fairbanks in June.  That was followed by a fiscal policy roadshow and meetings with business leaders on the issue intended to jumpstart the discussion.  He even used the massive attention paid to the amount of the Permanent Fund Dividend to draw attention to the tissue.  
  • The Rasmuson Foundation hired political strategy firm Strategies 360 and released polling data in August to push their vision of a revenue first approach.  
  • Budget gadfly Brad Keithley has continued to stump across the state for his “sustainable budget” which largely takes a cuts first approach.  
  • A group called Alaska Common Ground held an all day forum in mid-September that was well attended by community leaders, legislators, and legislative staff.  There have also been a smattering of locally organized fiscal policy forums around the state.  
  • A coalition of business groups including the Alaska Chamber of Commerce even announced their fiscal policy idea. They want spending cuts first, followed by a use of Permanent Fund earnings, then only as a last resort new taxes.

With so much activity this summer focused on the future of fiscal policy in Alaska one has to wonder what, if any impact all of the discussion is having.  In conversations I’ve had with legislators, policy advocates, and interest groups, it appears there has been little movement, if any.

Brad Keithley, a prolific blogger on fiscal issues and frequent participant in most of these forums said lawmakers are more engaged saying, “more legislators and staff are asking questions and wanting more insight, listening to the discussions” but he also acknowledged that hasn’t translated into a change in anyone’s rhetoric or positions “learning comes first.”

Republican legislators and local officials I spoke with from around the state were steadfast in saying their feelings and those of their constituents remained as pro-cut and opposed to taxes or Permanent Fund use as ever.  

One local official in the Mat-su valley told me the only change he’s seen in the debate is a shift “from what can we get to what do we absolutely need”  but not  “about revenue sources other than resources. I think that is still a ways off.”

House Majority Leader Charisse Millette said she is hearing the same thing from her constituents and caucus members “don’t wave the white flag of surrender on cutting spending.”  She said she doesn’t expect that to change because the Governor and Legislature “haven’t shown the public we can cut the budget.”

Senate President Kevin Meyer, however, said he felt the constituents in his moderate Anchorage district had become slightly less unwilling to touch the Permanent Fund. For his part, though, he still favors a cuts first approach, but acknowledged there weren’t $3 billion in cuts to be found, so something else will have to be part of the equation.

The Gauntlet of Paradoxes
Senator Meyer’s acknowledgement that there simply aren’t enough budget cuts possible to fix the state’s budget woes points to paradoxes plaguing the path forward.

The Catch 49: There is general consensus that state legislators will be unlikely to pass a solution to the fiscal problem that asks Alaskans to sacrifice anything such as some kind of use of the Permanent Fund, new taxes on individuals, or deep cuts state services, until every-day Alaska’s feel there is a budget problem, but then how do you get them to really feel that problem until the services they get from government have been cut or they have been asked to kick to pay for them?

The Mexican Denali Standoff:  The primary reason legislators are so reticent to address the fiscal problem is because they are afraid voters will punish them at the polls for whatever solution they support. As Senator Lyman Hoffman said during a recent Senate Finance Committee hearing ““Elections are coming up, and right or wrong, politicians worry about their careers first.”

The paradox lies in the fact that it is the very politicians and political parties who will be asked to find and vote for a solution who will be the ones leading the fight against those voted for whatever that solution is.  

Just a few weeks ago this paradox was on full display.  Governor Walker chose to use the annual announcement of the amount of the Permanent Fund Dividend to highlight the state’s long-term fiscal issues saying: “It is time to have an open and honest conversation about our finances, and how resources like the Permanent Fund can be used as an asset. The vision of the Permanent Fund was to turn a nonrenewable resource into a renewable one, and it is our job to determine how to best use and protect that gift for the benefit of all Alaskans.”

That press conference drew immediate commendation from the Republican majority in the State Senate who put out a press release saying: “Members of the Alaska Senate Majority commended Governor Bill Walker today for cautioning against associating this year’s large $2,072 Permanent Fund Dividend (PFD) amount with an improvement in the state’s financial situation.” Undeniably conservative Senator Anna McKinnon was quoted in the same release saying, “Our state is facing an unprecedented budget shortfall of almost $4 billion,” said Senator Anna MacKinnon (R-Eagle River). “While we certainly all look forward to the extra income, it’s important to emphasize that this year’s PFD amount in no way mirrors the state’s fiscal reality and I commend the governor for doing so.”

It seemed Gov. Walker and Republicans were willing to work together to have an adult conversation about the state’s fiscal issues without throwing rhetorical bombs at one another.

However, two days later the Alaska Republican Party put out a press release about the exact same comments by the Governor titled “Walker Administration setting up to raid Permanent Fund”.

Then on October 1st Rep. Craig Johnson joined in issuing a press release saying “Anyone thinking about raiding the Permanent Fund knows they’ll have to answer to Alaskans.”

Add to that demagoguing of the issue of the sort Democrat Senator Bill Wielechowski engaged in when he introduced a resolution to “protect” the PFD.  While not an attack itself, one can’t blame Republicans for seeing it as a prelude to an attack in next year’s elections if leaders choose to use the Permanent Fund as part of the fiscal solution.

This all highlights the core paradox: how can elected leaders ask each other to engage in a difficult conversation and craft a responsible solution when they know they will be the very ones attacking each other for doing it? They already are.

The Stalemate Ahead
In political science classes they talk about interest articulation and aggregation.  Those are the ways citizens tell their leaders what they want or need and how the leadership weeds out all of the requests to adopt core policies. In this case it seems that while the Governor is saying, and some legislators acknowledge, there needs to be new revenue options on the table, legislative leaders aren’t hearing the public articulate any interest in it.  Until that changes don’t expect to see the state legislature open itself up to attack from the left and the right for doing so.

Stalemate is the new normal for now.

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1 Comment on "Paradoxes Plague State’s Fiscal Debate"

  1. The legislative majority simply refuses to listen to the message the public and the experts are sending them. There will be no “new blood” this session so the paradox between facing reality and surviving politically simply won’t be allowed to surface as long as any cash reserves remain to be spent. Lyman Hoffman truthfully stated the priority to these incumbents and that observation will be the epitaph for the upcoming session.

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