If our old friend and my mentor, the late Senator Ted Stevens, were with us today, he would have a short and straightforward solution to your lengthy deliberations. It would be “do what’s right for Alaska”. And he might add a few swear words.
It is high time that our governor and the majority of our state legislators recognized the responsibility of each of them to represent the current and long-term interests of Alaskans. This can only be done by making timely decisions based on sound and established financial principles.
This legislature has been in session since January of this year. Since May 20, they have been in extraordinary session and the governor has indicated his intention to convene another extraordinary session from August.
The failure to solve our budget deficit and to propose to enshrine the dividend in the Constitution clearly shows the lack of discipline to separate good judgment from political expediency. It won’t be any easier in August than it is now.
Let’s face it, guys. Alaska does not have the funds available to pay a dividend close to the $ 2,400 proposed by the governor. To do so would be to reduce state services to a point of catastrophic proportions in the areas of education, health care, public safety, the ferry system, child welfare services, Medicaid, etc.
Reducing the profit reserve fund beyond the 5% of the value of the permanent fund agreed by the legislator in 2018 to pay the dividend would be a mistake. We have already exhausted our constitutional budgetary reserve fund. Once we embark on the path of exceeding the profit reserve beyond 5% of the permanent fund’s value, we are on the path to no dividend and no government share for finance public services. Just like dominoes.
To suggest that Alaska will derive more revenue from the sale of oil is wishful thinking. Oil prices go up and down with the Middle East setting the world price as they control oversupply and can quickly reduce supply and demand.
The earnings of the state equity portfolio may be affected by fluctuations in the US economy and stock market. The government could issue bonds to finance its deficit, but the bonds must be repaid. Reimbursement must come from reducing government costs, growing the economy, or new taxes. The feds don’t have that problem. They just print more money, and it’s called inflation.
The logic of inscribing the dividend in the state constitution is in itself absurd. This could put the payment of any dividends ahead of necessary state services to provide Alaskans. The timing of this constitutional question would also occur in the 2022 poll, which is an election year for the governor and the legislature. The governor and the legislature have an obligation to identify how to finance the government without jeopardizing the state savings account, namely the Permanent Fund. The dividend is a legitimate benefit for Alaskans, but I repeat, only if our state government can afford it.
Unfortunately, this is not the case today. We have a deficit, even though we are cutting back on state services while taking more of the revenue from the Permanent Fund to finance the state government. Almost at the same time, we are talking about raising taxes. It makes no sense to give money as a dividend and then turn around and tax the same beneficiary – the Alaskans – and then call it a source of income. Some lawmakers have suggested a tax based on a percentage of an individual’s federal income tax, but the truth is that we have little private wealth in Alaska. Real wealth comes from the production of the earth’s resources. Alaska lands are owned primarily by federal, state, municipal, and regional corporations, and you cannot tax government entities.
Distributing free money (what the dividend is) certainly creates a political constituency. And as Senator Stevens would say, “It’s not fair to Alaska.”
Frank Murkowski was Governor of Alaska from 2002 to 2006. He previously served in the United States Senate, where he served as Chairman of the Energy and Natural Resources Committee from 1995 to 2001.