The tricky politics of the early PFD

Something might be going on in there.The Alaska State Capitol building as photographed in 2010. (Photo by Kimberly Vardeman/Creative Commons)

This post has been updated at 5:15 p.m. to add some extra thoughts.

“I think it greatly increases the prospect of a fall special session,” House Speaker Bryce Edgmon told the Anchorage Daily News last week of Gov. Mike Dunleavy’s plan for an early PFD payout.

It’s a quote that I’ve turned over and over in my head since then as it presents a politically intriguing question of what’s next for the Alaska Legislature in a year where the biggest political battles—future of the dividend, the future of new revenue, the future of the budget—were shelved by the pandemic.

Many of those questions will ultimately be left to the next slate of legislators to answer (or at least try to answer) when the 32nd Legislature gavels in in January of next year, but things are coming together to put the political screws to the on-the-fence legislators just as voters head to the polls.

The straightforward look at the early dividend is that it meets today’s (well, July’s) needs while positioning the governor to make a push fill the gap (which he created) in the fall.

Moving the PFD from October to July 1 reframes the $1,000 payout as economic relief, akin to the $1,200 distributed by the federal government or the regular payments proposed by Mark Begich and Sean Parnell as part of their pitch to help the economy last month. The payments meet the immediate need, leaving the needs met by the traditional October payout—filling fuel tanks, buying groceries and preparing for the winter—unmet.

There’s also the near certainty that as much as our elected officials talk about returning to pre-pandemic normal the economy will continue to ail and potentially get much worse as a summer without a tourism season unfolds. And none of that is to mention the turmoil of a potential reclosure of the economy.

No amount of easing health orders will bring the cruise ships, more than a million tourists and their dollars back to Alaska this year. The pandemic has erased the state’s fragile recovery from the 2015 downturn and inflated the anticipated deficits in the current and future budgets. The economic pain for individuals will continue to mount as boosted unemployment benefits, small business relief money and federal dollars run out.

Whether a direct cash payout to all eligible Alaskans is the most effective use of the state’s savings likely won’t matter when running against the political expediency of a simple, broadly popular solution like direct cash payouts to Alaskans–one that has increasing buy-in as legislators see the economic fallout in their own districts.

Imagine what the pressure will be like in September of October.

It’s likely that the early payout is the governor’s latest and perhaps best shot at securing a second round of dividends, but it won’t be a slam-dunk win for the governor and his allies. This is where the politics get tricky.

Just as a fall special session would be a platform for a supplemental PFD, so too would it be a platform for lawmakers to litigate Dunleavy’s latest round of recall-inciting vetoes that once again hit local communities, public broadcasting and the Alaska Marine Highway as well as his first-time veto of K-12 education funding.

The reality of the governor’s cuts to local communities will be in sharper relief this fall when cuts to local budgets, cuts to schools and higher property taxes take shape.

Where the Legislature successfully kept a lid on the PFD and the vetoes during its return to Juneau to OK nearly $1 billion in CARES Act spending, an appropriations bill (like the still-needs-to-pass-at-some-point capital budget) could be an open, high-profile battleground for lawmakers and cut new political lines (not to mention that legislators are barred from campaigning during a legislative session).

New votes on those vetoes could be particularly uncomfortable for a swath of Republican legislators who won progressive allies in 2019 for fighting the governor’s first round of vetoes. Several will be looking to potentially contentious primaries against far-right candidates while others will be looking to contentious general election races in moderate districts, making the decision less clear.

The counterbalance to any talk of new state spending—whether it be some $680 million for a $1,000 dividend or a few hundred million dollars to restore the most critical of the vetoes—will be the dire outlook for the state’s finances that’s underscored much of the last month in the Legislature.

The precipitous fall in oil prices and the rocky performance of the Alaska Permanent Fund’s investments all mean that the budget deficit in the current year and the following will be nightmarish. Eliminating the dividend altogether would fall well short of the kind of spending cuts that would be needed to balance the budget, requiring legislators to not just push for cuts and deficit spending but also new revenues.

While so much in Alaska politics has been boiled down to the PFD vs. state spending, it’s always been more complicated than that. Many—particularly those anti-veto Republicans—have been driven by preserving the state’s savings in service of delaying the day where taxes become unavoidable.

Still, like I said at the start of this column many of those big questions will be saved for another day but the decisions made this fall, particularly whether they’ll tap into the Alaska Permanent Fund’s earnings reserve account to replace the vetoes or pay out a dividend, will greatly shape the decisions facing them in the coming years.

What’s ahead is, like much of the COVID-19 pandemic, filled with uncertainty.

Much of this will be driven by what happens over the next several months. Will the economic woes continue to mount? Will the virus make a resurgence in the fall? Will the economy make a wonderous rebound and will a vaccine miraculously appear? No one can say for sure.

These decisions ahead all present a serious gambit for everyone involved and unfortunately they’ll likely be made with their own immediate political survival in mind.

Extra thought: From another perspective, the prospect of a high-profile legislative session in the heat of the campaign season will give legislators the best stage they’ve had so far to make their case to the Alaska voters about the path forward. It’ll be interesting to see how it’s used and how the coverage shapes the process. You’d hope that it’d be a debate informed by the data, public input and policy experts that the Legislature can bring in and not one that, instead, strips away all the nuance in an effort to score cheap, undeliverable political promises. But, hey, this is Alaska politics we’re talking about.

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1 Comment on "The tricky politics of the early PFD"

  1. Just a thought: how much money is an income tax going to generate from an unemployed workforce?

    How much sales tax revenue is going to be generated from businesses that are closed?

    The idea that state spending can continue at current levels, if only supplemented by new state taxes, is ludicrous. The steadfastness against any type of meaningful conversation about reducing the footprint of state spending, after burning through more than $15 billion in state rainy day savings accounts the past decade, is amazing.

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