Political argument for Dunleavy's jumbo dividend dissolves with giant federal bailout
A nimble governor facing a budget crisis would recognize the political potential of the federal gift horse and adjust his plans accordingly.
But Gov. Mike Dunleavy is like that ship stuck in the Suez Canal.
He has yet to recognize that the COVID bailout law approved by Congress and President Biden has solved a major immediate financial puzzle for Alaska—providing an immense cash infusion that eliminates the political argument for the super-size dividend.
The same is true of the Dunleavy plan for a $300 million general obligation bond issue for construction projects across the state. Acting as if the federal bailout does not exist is unreasonable.
By design, the Legislature is not a nimble branch of government, but its leaders are quick enough to see the federal money as a political lifeline that justifies saying no to Dunleavy’s unsustainable draw on the Permanent Fund.
The House and Senate finance committees are looking ahead to the enormous deficit facing Alaska in the next fiscal year, while Dunleavy is trapped by reckless campaign promises that he never should have made and can’t keep. His $5,000 dividend, in the absence of any plan about what comes next on spending and taxes, would create a fiscal trap in 2022.
Earnings from the Permanent Fund are the largest source of state revenue. Taking an extra $3 billion out this year would cut future earnings by $160 million a year, every year.
The claim by whoever wrote the Facebook post below for Dunleavy that “this is not a political issue” is ridiculous. The Dunleavy fiscal fantasy tour has always required the suspension of disbelief.
There is no summary of the total amount of money that will come to Alaska under the bailout, but it easily exceeds $4 billion and could be $5 billion or more.
The federal payments of $1,400 are expected to inject $847 million into the Alaska economy, going to about 600,000 Alaskans. That alone would be enough to take the air out of Dunleavy’s extra-dividend balloon.
But the flow of funds from the federal bailout will goes far beyond those direct payments.
More than $2 billion is going to state and local governments. About $1 billion of that is going to the state and can be used on expenses until the end of 2024.
In addition, about $600 million is going directly to tribal governments. About $100 million is going to tribal governments for child care. The expansion of the Child Tax Credit and the Child Care Tax Credit is worth hundreds of millions to Alaska families, helping more than 200,000 children.
For families in the bottom 20 percent of incomes, the child care credit could mean an income shift of $5,000 a year, according to an analysis by the Institute on Taxation and Economic Policy.
The extended unemployment benefits will help workers and the Alaska economy. Taken together, this unprecedented federal spending effort allows the state to conserve its resources for 2022 and beyond.
While the bailout law is roundly opposed by Republican officials, including those in Alaska, it has changed the economic outlook for Alaska in 2021, even if Dunleavy has yet to change the talking points he repeats at every opportunity.
