The Senate and the House have rejected the radical elements of Gov. Mike Dunleay’s so-called Honest Budget—showing bipartisan support for education and other public services.
But disagreement on the size of the Permanent Fund Dividend has led to a political stalemate in which everyone is unhappy.
A compromise that no one likes is in order, one that won’t make everyone happy, but will contain a plan to pay for state government.
Dunleavy said Monday that a plan to pay $1,600 per person in dividends is unacceptable.
“This bill kills the Permanent Fund Dividend as we know it. The PFD is your share of Alaska’s mineral wealth, and there should be no change to the dividend without a vote of the people,” Dunleavy said in a statement Monday. “That’s what I promised on the campaign and that’s the promise I intend to keep.”
First off, Dunleavy is wrong that paying more than $1 billion in dividends amounts to “killing” the program.
He said a lot of nonsense during his campaign, promising everything to everybody, and he has yet to face the real math challenges that come with the Alaska budget. He needs to work this out with the Legislature and end the fantasy phase of his administration.
The size of the dividend this year is nowhere near as important as the bigger task—developing a fiscal plan for the state that avoids these annual Juneau meltdowns.
The desire by Alaskans to have public services and dividends should be enough to get every elected official talking about taxes, which most people in public office still refuse to address, regardless of the financial realities.
That includes Dunleavy, who was a leader in the Senate during the years in which it spent billions in reserves, while promising that taxes were not needed and oil would save us yet again.
The state’s newspapers and leaders of civic organizations and other institutions can help by reminding people that even with new taxes we would still have the lowest taxes in the country, or close to it.
A few basic steps could solve most of the problem and stabilize Alaska finances—raise oil taxes by reducing the per-barrel credit, enact a state income tax and/or a state sales tax, and cap the Permanent Fund Dividend.
Objections aplenty would be made about all of these, but there is no solution with the potential to make everyone happy. And there is no potential solution that focuses exclusively on cutting the dividend or raising oil taxes or eliminating state services.
Taxes are unpopular and always will be, but they are the price of a modern society. We need state and local governments that function well enough to attract investment and encourage families to stick around, providing the foundation for healthy communities and a sound economy. Enacting taxes and capping the dividend makes sense as part of a compromise plan that helps pay for vital public services.
Some public officials won’t talk about taxes as long as the state is paying any size of Permanent Fund Dividend. Others stick to talking points to oppose all taxes all the time, never bothering with the complicated balancing act required of a good public official.
The governor may follow through on his veto threats and it takes a three-quarter vote of the Legislature to override budget vetoes, which is a difficult margin to achieve.
There is a lot of babbling about a budget crisis in Alaska. We have a crisis, but it’s one created by a lack of leadership, not by a lack of solutions.
Dermot Cole can be reached at email@example.com