Senate overdraw would put Alaska on path to liquidating Permanent Fund

The regular session of the Alaska State Legislature concluded as it began, divided over the dividend.

The Senate voted 12-8 for an unsustainable Permanent Fund Dividend, charting a course for liquidating the fund.

The good news is that the six-member conference committee that will work out differences between the House and the Senate versions of the budget—setting the dividend amount is part of that work—includes Sen. Bert Stedman and Rep. Steve Thompson, two of the most astute number crunchers in the Legislature.

The other members of the committee are Reps. Neal Foster, and Kelly Merrick and Sens. Click Bishop and Donny Olson.

Five of the six “are not supporters of the PFD in any significant amount,” claimed Wasilla Sen. Mike Shower on Facebook.

Shower’s notion of significance differs from mine. In the Senate Wednesday night, he behaved as if a deficit of $1 billion or $2 billion is nothing to worry about, showing that the Anti-Math Movement remains powerful within the Republican Party.

“We’re flush in cash right now. This idea that we don’t have money, that we can’t afford right now to pay $1.5 billion in good faith to the people to follow that statute, even though it might be breaking another one,” he said, “Why wouldn’t we do that?”

That he asks the question shows that he doesn’t understand the disciplined approach required to be a competent member of a board of directors charged with setting policies for investing tens of billions for the long term.

The governor and Legislature need to think about how decisions made today will impact the future, but Shower and others have their eyes on the next election. Rather than focus on generations to come, they worry about what it takes to get re-elected—which is why they promise to give out plenty of cash.

“We have more than enough money, even with the fear mongering here, to pay a dividend, a statutory one, that will help people, one time,” Shower said.

“I hear people talking about this like it’s a long-term thing, that we’re gonna keep doing this until we crash the ship,” Shower said. (What he’s hearing is correct, based on past performance.)

One time, that’s it. Never again. Just once. The Legislature will refuse to take an unsustainable amount from the Permanent Fund after taking $1 billion or $2 billion this year to satisfy the loudest voices in the room.

Believe that and you will have missed the most important lesson to be drawn from the case of the disappearing billions drained from the Constitutional Budget Reserve.

The budget conference committee will settle on a number for the dividend, which ought to be significantly lower than the $2,300 to $2,400 per-person approved by the Senate. Paying that amount creates a deficit in excess of $1 billion. It’s too soon to say how this work, given the legislative divisions.

On a 10-10 vote, the Senate failed to approve the so-called “full dividend” of more than $3,400, but approved on a 12-8 vote a dividend of about $2,400 per person, the so-called “50/50” plan, which still creates an unsustainable deficit.

Right-wing Republicans and some Democrats want to pay hefty dividends. The difference is that the Democrats say they will cover the deficits created by hefty dividends with higher taxes. Trouble is, those higher oil taxes, plus an income tax and more, are not going to happen. Other Democrats make the point that with the current tax regime and power structure, the fund is at risk if dividends are too high.

Meanwhile, the right-wing Republicans cover the deficits with nothing more than gibberish about cutting the budget.

Even a determined budget cutter like Shower said he served on budget subcommittees that could only find $43 million to cut this year. That’s insignificant when the deficit is $1 billion or $2 billion.

Other Republicans can’t accept the idea that the state would be taxing people while also paying people dividends.

The divisions in the Alaska Legislature reflect the lack of any fiscal plan for state government, as Gov. Mike Dunleavy wants to talk only about dividends and not how to pay for anything. As the Wrangell Sentinel put it this week in an editorial, “It’s as if he believes someone else is in charge of unpopular taxes, while he is in charge of popular dividends.”

Dividends are popular and elections are popularity contests. It’s the unstoppable political force meeting the immovable political object.

For the Senate debate, Shower came equipped with financial charts showing the miracle that awaits. He said his charts show how the budget can be balanced with a tiny state sales tax with almost no exemptions and $200 million or $300 million in higher oil taxes. He didn’t propose those things or endorse them, and no one has tested his numbers or explained the impact on local government of a state sales tax, so his charts deserve as much respect as a timeshare sales pitch.

Shower claimed, “We all know with our inability to reduce the cost of government enough to balance the budget, we’re gonna have to do something else.”

We’re gonna have to do something else, but we don’t have to do something else now, according to Shower and the Anti-Math Movement. It’s only $1 billion or $2 billion.

I still think that a solution that makes everyone unhappy is the best we can hope for—a smaller dividend, an income tax, higher oil taxes, higher gas taxes and limited spending increases.

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