It is clear with the outcome of the Alaska primary elections that there have been heavy losses sustained by those of us who value a rational approach to the state’s budget process. The winners of these primary races are from a wing of the Republican Party that believes in Dunleavynomics. Dunleavynomics is shorthand for the belief not supported by mathematics that somehow the legislature can payout massive dividends without causing significant harm to future Alaskans.
Let me be clear about a few things: James Kaufman, Roger Holland, Robert Myers and Tom McKay all ran against real conservatives who could do the math on the state’s budget problem. These individuals made a commitment to a dividend payout that is not mathematically sound, and that promise they made says something about them, that either they don’t understand basic arithmetic, or they simply don’t care about the future of Alaska and Alaskans.
The only way these radicals can pay for the massive dividend that they want is to spend down the Earnings Reserve Account of the Permanent Fund. If they do that then the massive dividend will be paid out, but something horrific will be the consequence. Given that over the last five years the Earnings Reserve Account has been a major funding source of critical government services with it being drained there will only be two options. The first is for the legislature to make across the board and very harsh budget reductions to try and balance out the spending side of the budget with the steep loss of revenue. These budget cuts will be so bad that the Marine Highways will be shut down and people on the state’s Medicaid program will be kicked off the rolls because there will be no money to support them.
The second option is to impose a supercharged income tax as well as a sales tax to make up for the loss in revenue. Given the state of the economy it will not be possible with an income or sales tax to make up for the loss of revenue quick enough. On top of this there is no way that revisiting oil taxes will be able to help the legislature get out of this hole. Because there is no oil tax policy that the legislature could implement that would bring in revenue fast enough to prevent the state from going over a fiscal cliff. In fact, given the state of oil markets it is very doubtful the state would get much revenue out of a new tax scheme.
As far as the Earnings Reserve goes, once it is drained to payout the massive dividends there will be no way to build it up again. Prudhoe Bay is not producing millions of barrels of oil and given that most of our major oil fields in the state are legacy fields that are now in harvest mode there will not be another tax source to build up the Earnings Reserve. All this is to say that this election will determine whether we have a fiscal future where our modern industrial society survives or one where it is desolate and future generations will have little opportunities here. It is more critical now than it has ever been to ensure that the House Coalition remains intact to help get our state through the rough waters ahead.
It is also just as important that Gary Stevens and his colleagues that are left get reelected so that there can be a formation of a bipartisan coalition in the Senate to work in conjunction with House leadership to save Alaska. It is our responsibility as concerned citizens to ensure that Dunleavynomics does not become public policy and we must all get out and support candidates who embrace the mathematical reality of the budget. If more rational people had turned out to vote we would still have Jennifer Johnston and Chuck Kopp in the mix. But they did not turn out in the primary election and I hope for the sake of our future those folks turn out in the general election to save Alaska from going off the Dunleavy cliff.