As the Legislature’s budget negotiators wrapped up work on the budget last night, setting the dividend at $1,100 or $525 depending on where the votes are for the three-quarter vote, Gov. Mike Dunleavy sent out yet another sad gesture in support of the PFD he promised Alaskans but has yet to deliver.
“This year’s PFD could be as low as $525, 1 of the lowest in AK history, due to budget negotiations today in #akleg,” he tweeted in what might as well become a form letter at this point. “Once again the PFD is a political football subject to the whims of politicians. This is further proof we need to protect the PFD within AK’s constitution.”
First things first, the dividend will only be as low as $525 if Dunleavy-aligned legislators reject the three-quarter vote needed to keep the state’s finances in order. Negotiators have tied that vote to the PFD and a bevy of other spending as part of a last-ditch effort to bring a massive amount of political pressure on unwilling legislators—including on everything from college scholarships and local school projects to oil tax credits—to push the budget through the gridlock and acrimony that have come to define the legislative process in Juneau.
But that’s just some context worth pointing out.
No, what is so notable about Dunleavy’s perfunctory attempt to drum up vitriol on the dividend is that the size and future of the dividend is truly in the governor’s hands. If he wants to finally deliver some fraction of his 2018 campaign promise, he needs to explain how he will pay for it.
And, no, the lame attempts to suggest that hundreds of millions of dollars will be carved out of state spending at some point in the future when he himself has been unable to make even a fraction of those cuts to the state’s bottom line in his first three years in office doesn’t cut it. Just like the draconian cuts put forward under Office of Management and Budget Director Donna Arduin for his first budget, the whole plan is predicated on laughably unrealistic changes to the state’s bottom line. But unlike Arduin, whose mostly specific cuts made her a villain to most, there’s no detail to this latest plan.
Dunleavy may have learned a lesson about optics. If only he had a lesson in leadership.
Instead, Dunleavy’s latest iteration of a plan is to first demand the state lock itself into a large dividend without specificity about what comes next. Whether we’re paying for the dividend or filling the hole left by paying a dividend (a matter of framing), it will require incredibly deep cuts to state government—the likes of which would necessarily affect K-12 education and Medicaid that will heap the pain on those least able to afford it—or new, higher taxes. Those can be sales taxes, income taxes, oil taxes or a combination of the three and a mixture of some yet-to-be-identified others.
But until the state can answer the question of what’s next, legislators from nearly every political color are right to be wary of handing over the keys to the state’s financial future. There’s a lot for everyone to dislike in the panoply of structural deficit-closing measures that the state would be forced into.
All of this returns to the core question that we’ve been battling over in one way or another for the last decade: Who pays?
It’s a conversation legislators have largely sidestepped thanks to the billions of dollars of savings or cuts to the dividend that provided an easy way out for years, but has come back into focus in the last weeks as legislators have got a cold hard dose of reality. The numbers simply don’t add up for anyone but the most deluded of politicians. But that’s where the agreement among the majority of clear-eyed legislators ends. Should there be a tax to balance out the cost of paying for government? What size of a PFD is fair and equitable? Some say the dividend’s core to the identity of Alaska and must be preserved at high levels while others scoff at it as “free money.”
And while there’s a debate to be had on that point, the fact remains that the governor has continued to insist that the state can somehow pay both a large dividend without instituting a tax. If it were that easy, as many have said, it would have already been done. It leaves today’s legislators in an impossible spot. While some have gone ahead and proposed their novel solutions to balance the budget, Dunleavy remains steadfastly opposed to taxes (his administration can’t even commit to having its own revenue proposals at a fall special session about new revenues). So, then why take the budget situation seriously and expend the political capital necessary to reach a solution if the governor’s not taking it seriously and wields the veto pen?
At the end of the day, there’s a majority of legislators who support a larger dividend but there’s not a majority of legislators who support one that we can’t afford. And until then the dividend will continue to be the first call to balance the budget.
All of that changes the second the governor takes some leadership and backs new revenue. Even a sales tax–as admittedly regressive as it is–would likely find broad support in a Legislature hungry for a path forward. But that takes a governor who’s serious about defending the permanent fund. As long as the governor stands in the way of new revenue, clinging to the fantasy that it all can be done without pain, he will also stand in the way of larger dividends.