A first in a several-parted series examining the problems ahead for Alaska.
By the end of today, we’ll have a nearly complete look at the slate of candidates running for state office this year (candidates can drop out and be replaced by the party after the primary). Voters will pick
50 51 of these men and women to fill the seats of the House and Senate, determining the balance of power in the Legislature and setting the state’s course in these uncertain waters for the next two years.
Now more than ever, this slate of legislative hopefuls needs to make their case Alaskans with specific solutions instead of the vague promises to cut or to preserve critical spending.
Before the pandemic took a bite out of oil prices, put a damper on the state’s investment revenue from the Alaska Permanent Fund, erased a tourism season and put tens of thousands of Alaskans on unemployment, the state already faced incredibly tough decisions as the state nears the end of its savings accounts without a fiscal plan that balances the budget just as the state’s economy was shakily emerging from the 2015 recession.
Where the politically unrealistic complete elimination of the dividend once could make the books balance, the state now would be left with an estimated $400 million deficit with a zero PFD.
Legislative Finance Division Director Pat Pitney laid out the harsh reality facing Alaska’s Legislature going forward at a meeting in April; no longer will it be a politically convenient either/or decision when it comes to cuts, new revenues and the PFD but a no-easy-choices all-of-the-above effort that will require the passage and repeal of laws that dictate spending and revenues.
“Changing the dividend formula is not enough to close the structural budget deficit. We have statutes for expenditures, we have statutes for revenue. The number of statutes that we have that drive expenditures well exceed the revenues that accommodate revenue inflow,” she told the Legislature at an April 22 hearing. “The statutory structural deficit that we have is a must to get to a structurally balanced budget. That structurally balanced budget has to be addressed in the very near term because we no longer have the luxury of the (Constitutional Budget Reserve).”
The current slate of legislators aspired to answer some of these questions, but any earnest discussion of solutions never came as the pandemic scuttled the session as legislators raced to pass a status quo budget and head home. Today, thanks to the pandemic’s hit on the state’s bottom line, we are even further from a sound fiscal plan than when legislators gathered in January.
The next slate of legislators will not only be charged with determining the future of the dividend and state spending but will also be forced by the scale of the problem into discussions they’ve avoided for the last few years like formalizing cuts the dividend, to Medicaid, to oil tax credits and to K-12 spending while also looking at the other end of the ledger in oil taxes, income taxes and others.
They won’t have the cash reserves (well most of them) that have allowed legislators to continue to kick the can on these difficult issues for years.
As the campaign begins to unfold, legislators should be addressing their plans for these issues with as much specificity as possible.
It’s long past time that calling for cuts without naming specifics—a long-popular route with conservatives that skirts the unpopular decisions with a vapid call to “find efficiencies”—should be an acceptable answer to voters. Cuts will necessarily mean fewer services for more people, and legislative hopefuls should be frank with that.
Want to maintain the PFD? Then you should offer a plan to get us there because yelling about the legality of it is convincing no one.
And on the flip side, defending existing non-PFD spending or calling new spending, too, should come with justification of why the spending is needed and a facts-based discussion on how to pay for it (though don’t take this as support for the “everything in government should be run like a business and everything needs to pencil out on its own” thinking bandied about to dismantle the ferries).
While much of Alaska politics in the last few years has been couched in terms of the dividend versus state spending on things like the University of Alaska, public broadcasting, education and the Alaska Marine Highway System, the reality is that it’s not just a two-way battle with politicians neatly organized on either side.
What’s been largely absent during the last few years in the Legislature is any serious talk or action on new revenues that could change the shape and size of the deficit such as revised oil taxes, further revisions to the oil tax credit system or broad-based taxes such as an income tax, education head tax or a sales tax. The issue of taxes cuts across these established political lines.
There are some that support the PFD, support spending and support new revenues. Others support the PFD, oppose spending and oppose new revenues. And yet others oppose new revenues, oppose the PFD and support whatever spending is left over.
It’s a far more complicated discussion that demands more complicated solutions.
Yes, the call for specifics in a political season is aspirational but it’s what Alaska needs right now. Continued avoidance of discussion about real solutions to Alaska’s fiscal woes might stretch your political viability but it does nothing to stretch the state’s dwindling savings.
Alaska is running out of room to kick the can, bringing us even closer to the day where legislators lacking the political courage to make those tough decisions will invite themselves to begin spending from the Alaska Permanent Fund with reckless abandon, putting not just the dividend but the future of Alaska in peril.
The sooner Alaska can reach a course of action, the sooner we can start looking ahead and the sooner the state will have the tools and the stability to help guide the economy out of the pandemic-caused recession that’s likely to inflict economic pain for months if not years to come.
Alaska and Alaskans will be best-served by politicians who have the courage and convictions to speak openly and honestly about the decisions ahead, acknowledging that things will be uncomfortable for some and world-altering for others because the reality is that Alaska can no longer afford to keep doing what it’s been doing for much longer.