June 07, 2019
Friday AM

As this week comes to a close, the legislature has yet to finish its work on the budget and the State is nearing a possible government shutdown. What’s the holdup? While there are many issues including the Governor’s unconstitutional claim that he can simply not fund education, the issue that has tied up the legislature and left us in a stalemate at present comes down to a question of the size of the Permanent Fund Dividend. Should it meet the Statutory Formula (currently around $3,000)? Should it be reduced so that we can break the impasse on the Operating Budget and ensure that needed state services are not interrupted? Should we develop a new formula and pay a full Dividend this year? All of these are valid questions with strong constituencies. The answer lies in a place that will likely leave no one fully happy.

Earlier this year – and for the prior two years – I have proposed a Constitutional Amendment which, if passed in its most recent form, would place the Dividend in the Constitution with a new and sustainable formula. Under the current formula most analysts agree that eventually we would be faced with massive deficits in the near term and a depletion of the Fund and consequently an end to the Dividend in the long term. Neither is a good option. Under my plan, SS SJR 2  would propose a 4 percent annual use of the entire Permanent Fund (4 percent of Market Value, or POMV) with 50 percent dedicated to the Dividend and 50 percent dedicated to state services. While initially a reduced dividend (about $1,900 this year), the Dividend would grow with the robustness of the Fund and the draw on the Fund would be fundamentally sustainable.

Alone this bill would not be sufficient to meet our obligations for state services. For the past seven years the legislature has diligently trimmed back the budget and this year an additional over $200 million was proposed to be cut by strong majorities in the House and the Senate. Most of us - Republican, Democrat, and Independent – agree that we have reached the limit of what we might cut without seriously harming the economy and the quality of life of our state. That means that, as I have written before, if we are to live within our means we need to get a fair share of our means. I have supported, and continue to support, a significant revision of the tax credit policy we presently provide the oil industry in Alaska. At present oil prices the oil industry receives a $8 per barrel credit against their taxes. I have supported a significant reduction in that tax credit, or its elimination, to ensure that we receive full value for our non-renewable resources in a manner that ensures we aren’t with empty holes in the ground and a slowly deteriorating state. The alternative to a fair tax rate on the oil and gas industry is higher crime rates, a breakdown of our infrastructure, a weakening education system that is showing significant improvement, and a loss of opportunity for all young Alaskans. That is not a future I hope – nor is it one we should allow to happen.

Today, this week, this month we must resolve the Dividend question for this year and set out a path for how we will address the Fund, the Dividend, and oil and gas taxes in future years. After reviewing all of these issues, I will not be supporting a full Dividend this year. While this will anger some of you and please others, it leaves me in a frustrating and uncomfortable place. But it is not my job to make everyone happy. It is my job to ensure we have a sustainable future that serves all Alaskans. We can’t afford a full dividend this year without risking our education and health care systems. 

I continue to implore my colleagues to constitutionalize the Dividend or come up with a statutory plan that seeks a positive outcome for our future. I have faith that we will do so.

Sen. Tom Begich
Email: Senator.Tom.Begich@akleg.gov
Anchorage, Alaska

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The text of this permanent funds' opinion newsletter was NOT edited by the SitNews Editor.

Received May June 06, 2019 - Published June 07, 2019

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