McGUIRE’S SB 114 WOULD HAVE SOLVED SO MANY PROBLEMS FOR ALASKA
As the Alaska Republican Party gets ready for a big Unity Gala on Dec. 6, it’s facing epic struggles from within — an argument between those who want the statutory Permanent Fund dividend paid, and those who are willing to pay out a dividend based on what downsized government programs don’t need.
A handful of hardline Republicans are even planning to picket the Unity Gala, calling those who attend compromisers and “rinos” — Republicans in Name Only. Among attendees? Gov. Michael Dunleavy and about 800 other Republicans who are trying to bring some harmony back to the party.
Those protesters risk marginalizing themselves and their message, falling on the sword of the Permanent Fund dividend, when so much more is at stake — including another $1 billion deficit faced by the Dunleavy Administration in the coming budget cycle, and dropping oil prices combined with flat production.
Far more things define Republicans than divide them. The Permanent Fund — as it’s currently paid — is problematic, in that it’s going to be a political football each and every year and lead to instability and division. Of course, Alaskans can thank former Gov. Bill Walker for making the dividend a political decision, but since he did so in 2016, the majority in Legislature has continued the “Political PFD” practice, rather than repair the formula itself.
Ultimately, this protracted argument over the statutory formula is one that didn’t have to occur. There was a solution offered in 2015 — an elegant solution.
SB 114 came from then-Sen. Lesil McGuire, who argued for a “Percent of Market Value” approach to tapping the earnings of the Permanent Fund. And a set formula for determining dividends going forward.
She fought for her legislation for two years, and in April, 2016, made one last valiant push for it in a commentary that ran in the Anchorage Daily News (then-Alaska Dispatch). Here’s what McGuire wrote in 2016:
By SEN. LESIL MCGUIRE
Hey, Alaska! Have you heard about a plan that would help stabilize government services, enhance our fiscal health, prevent a deficit-driven recession and ensure a dividend is still paid to every Alaskan?
By now almost everyone knows that the state is facing a very serious budget deficit. The Legislature has reduced spending by more than $1 billion over the last two years. We are currently looking for additional reductions and greater efficiencies. There have been tax proposals introduced. However, even a combination of taxes and budget reductions will never close the deficit. We have been saved before by rising oil prices. We will not be saved this time.
The word “petrichor” means the smell of rain. Many Alaskans believe the Alaska Permanent Fund was created as a rainy day fund — for when the revenue from our nonrenewable resources diminished. The volume in the trans-Alaska pipeline is so low oil would have to rebound to $110 per barrel to balance our budget. Does that mean it’s raining?
Einstein said, “You cannot solve a problem from the same consciousness that created it.” We need to find a new path. We will not raid the Permanent Fund.
Last April, I introduced Senate Bill 114. If enacted, the bill would cut the deficit in half. It would guarantee every eligible Alaskan at least a $1,000 dividend. Because it would not close the deficit entirely, it would maintain downward pressure on the size and spending of state government.
Here’s how SB 114 works: It would recalibrate where the dividend comes from by tying it directly to the royalties the state receives from mineral leases.
Responsible development means a bigger dividend.
Next, the bill would utilize part of the Earnings Reserve Account in a percent of market value calculation to yield a sustainable revenue stream for essential state services.
This is not a raid on the Permanent Fund. In fact, SB 114 would help protect the fund and the dividend program by restoring a measure of sustainability. This is not a way for government to increase its budget.
SB 114 connects Alaskans directly to our share of the natural resources, which belong to each of us. It protects the dividend into the future, because without a structural change the dividend will likely end in a few short years. This bill is a way to ensure essential services for Alaskans can be provided, such as: public safety, firefighters, roads, education, health and human services, the Alaska Marine Highway, parks and recreation, and fish and game management.
When I crafted SB 114 I had these principles in mind:
1) it must retain a dividend without making the dividend dependent on the size of government.
2) It must reduce the volatility in the state budget.
3) It must clearly expose the cost of government, and ensure Alaskans could begin an honest assessment of needs versus wants.
4) It must be enduring to allow the maximum use of our wealth over generations so the benefits and burdens are shared.
5) It must be simple and easy to implement.
This is a new path forward.
Without a new approach, our Constitutional Budget Reserve will be drained entirely in only two years. Once this happens, the single remaining source of funding for services will be the Earnings Reserve Account — the same one used to pay dividends. When that day comes, the state will have to make the difficult choice of paying out dividends or funding essential services for Alaskans.
Even if every new proposed tax was implemented immediately, the Earnings Reserve Account would still be in the financial crosshairs in just three years, placing the PFD in jeopardy.
If we take a new path, such as SB 114, the state will dramatically reduce income volatility and preserve the dividend program for future generations. There are two other proposals to re- engineer the use of the Earnings Reserve Account. Only SB 114 guarantees a dividend of $1,000 or more. The dividend has helped make Alaska a great place to live for decades. I remember the day when I received my first dividend check, and what it meant to me. I have a deep personal connection to the program, but if we don’t act soon to protect it, the dividend may go the way of the dinosaur.
If you like the dividend program, SB 114 is your bill. If you’d like to see reduced volatility in state budgeting, SB 114 delivers. If you’d like to see continued downward pressure on the spending of state government, then my bill make sense.
I can smell the petrichor in our path. At this critical juncture in Alaska history, SB 114 is a new path forward.
Sen. Lesil McGuire, R-Anchorage, served in the Alaska Legislature from 2001-2017.
It is not the protesters who marginalize the voters, rather it is the politicians who are unable and unwilling to live within a budget we can afford. Our legislature has been controlled by Republicans for years. They bear the blunt of the immature ability to manage a budget. It is easy to point fingers and deflect the real responsibility somewhere else, but it does not address the problem.
There’s a little disagreement, that there are good ideas That have been proffered, for potentially reforming the dividend and balancing the budget. The central question, however, is whether or not the people should have a say in the process of choosing one (or not).
The establishment has such disdain for the public and their opinion, that they have actively worked to prohibit their input into this process.
This is how, and why Michael J Dunleavy became Governor. To give the people a voice.
This is how, and why, the establishment loathes him.
I applaud your courage in starting the most important dialogue we, as Alaskans, must have at this point in time. It is the Alaska economy, which is resource based, that must be nourished, and it is up to the legislature to clear the path. Alaska has the potential to boom and float all boats…
Walker’s raid on the PFD is emblematic of the “solutions” offered by the typical politician…conservative and liberal alike: when decades of government overspending and growth finally catch up simply blame the shortfalls on factors outside their control, make some small but easy cuts, threaten to cut essential services (but not the sacred cow social services), and then look around for additional “revenue.”
Revenue, to most of us, is something earned through the voluntary exchange of goods and services between free people. You have something I value more than the cost you’ve assigned to it and vice versa for you. I give you cash, you give me whatever you’re selling and we both walk away feeling like we got the better deal. We both feel like winners.
Revenue, to a politician, is whatever he or she can take from the rest of us. That’s obviously how Walker viewed the PFD and, trailblazer that he was, his example has inspired those who followed him. Essentially the political class wants something you have (or are entitled to) and they take it because they can. They walk away with your stuff and you walk away angry but impotent to do anything.
Well, impotent to do anything except to vote in a new governor who campaigns on the promise to respect your property rights.
So that’s what Alaska did and here we are witnessing the results of democracy in action…as modified by the liberal judicial system, the fake news, the entrenched political class and the ignorant, apathetic and greedy masses who don’t want their share of the government pie affected.
Governor Dunleavy has exactly the right approach…it’s time to shrink government and to reduce the budget.
The role of state government is to provide essential public goods and services, to protect our rights (including our property rights) and to promote private economic development (by maintaining a level economic playing field for the rest of us compete on while staying out of our way).
It is not the role of our government to provide us with jobs or extra cash to raise our standard of living beyond what we’ve earned. If a politician talks about how cutting government jobs will devastate the state economy that politician is either hopelessly ignorant or lying.
All government jobs (with attendant benefits and retirement) are paid for with dollars taken from the only available source…the rest of us. Every dollar spent on a public (government) job is a dollar that could have funded a private job.
It is definitely not a role of government to compete with or crowd out private enterprise using public money (aka money taken from us). Both API and the long term care facilities affectionately known as Pioneers Homes (with a one year Alaska residency requirement to apply) are state run medical facilities that use public money to crowd out the private sector.
Everywhere you look in Alaska you can see examples of inappropriate government spending (and over spending). The pandering politicians and the vested masses don’t want that to end. The governor has an almost impossible task ahead of him in trying to get this under control. He’s got my full support and he needs yours.
This is so well written! Thank You. I wish you could forward this to me. Would love to share because it hits the nail on the head…..
Very well written!!! Thank you!
What percent of market value was being proposed in this bill? Could it be changed at any time by the legislature? Should a concept like this be enshrined in the Constitution and voted on by the people? I believe that any change in the decades proven formula should require a vote of the people.
The translation of the Oil Wealth into the Permanent Fund is still the way forward for the Dividend and Revenue for Gov’t spending. Removing the protection for the Dividend funding is the problem. Restore that protection, in the form of dedication, and Statutes can control the process of distributing the Funds earnings. Otherwise we are forced to put the split of the Earnings (Dividend vs. Revenue) into the State Constitution. At this juncture the State Gov’t has presumed to take control of all the Fund’s Earnings. And the Dividend which should be defined by Statute is now a discretionary item in the State Budget…. That must change. Alaskans are NOT content to depend on Gov’t to payout a Dividend from what’s left over. The 50/50 split, as envisioned by Jay Hammond, is still the way forward. And the People should not have their Dividends taxed, especially in a discretionary manner, without their consent. The laws pertaining to the Dividend must be followed. Otherwise, tyranny reigns…
What a crock!
Food for thought. What was on my mind then, and now, is Grayson and the future generations of Alaskans. They should have the opportunity to live in a state that has a sound fiscal policy with its leaders focused on new economic growth instead of jousting at the same windmills. It’s not only expensive, it may cost them their future. We can share the resources of this land, still live within our means and support our most vulnerable. It’s possible and they are counting on us!
Sums it up perfectly, Lesil…
2-step process.
Step 1- repay every penny garnished by Walker and the subsequent legislatures.
Step 2 – some form of POMV with disbursement locked in via legislation
If you don’t restore trust (and there is precious little of it remaining – thanks Bill Walker, Robin Brena, Bruce Botelho, Alaska Firsters, unions and Backboners), there will be no progress until it runs into a wall at 100 mph. Cheers –
The Legislature needs to pass a resolution calling for an amendment to the Alaska Constitution that embeds a PFD formula in our Constitution. Alaska’s citizens, the legislature and the elected and appointed officials would be well served by having the certainty an amendment that would guarantee a PFD and provide more certainty to budget deliberations. Putting the formula in the Alaska Constitution would also help the Trustees and staff at the Permanent Fund Corporation engage in prudent investments.
Joe, the existing POMV provides Alaskans and Legislature all that’s needed and further provides Permanent Fund Corporation enough to handle their prudent investments. Granted it can be changed if the State has unusual circumstances but that should be what we elect them for IMO.
I don’t see this Legislature coming to agreement on such a PFD formula that would work and be cemented for our future. Just my opinion.
Senator McGuire’s POMV (Percent of Market Value) idea was adopted by SB-26 that was passed in 2018. This is good. But I disagree with her principle #1): “it must retain a dividend without making the dividend dependent on the size of government.”
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The size of the dividend needs to be inversely proportional to the amount of excessive government spending, so that all the people will be motivated to reduce excessive government spending. If they are not motivated, then a state income tax will be the result, and the dividend will change from an honest “dividend” (coming from a budget surplus), to an income transfer payment. The only way to maintain honesty in that situation, would be to change the name of the check from “dividend” to “public assistance”.
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I suggest changing the current PFD statute from 50% to 12.5% (which is 1/4, since the flow through the oil pipeline is about 1/4 of the 1988 peak). Then, the new hypothetical statute should also state that the PFD shall be more than the 12.5% base level if there is a budget surplus. In other words, motivation to trim government is built right into the statute.
As long as the billions are their the power players and unions will try to get there fair share. The only way to protect this fund is through legislation other wise they will be like rats on cheese. Legislation could make it so nobody can drain the fund or misuse it. One it is gone the taxes would be so high only the rich and unions could live here. Take the cheese away from the slobbering rats.
Testing political waters, preaching to the choir, hoping voters have short memories?
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Just what Alaska’s Republicans need, an invigorating lecture from one of the legendary McGuire-Anderson political troupe…
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Hey Lesil, here’s another word: “putrescent”. It means the smell of Alaskan politics, then and now.
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Here’s another big word: “budget cut”. It’s a term of contempt used to mean temporarily slowing -the rate- of government growth.
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What a surprise… more money’s going out than coming in!
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No outside forensic audit proves “the state is facing a very serious budget deficit” and officials, elected and unelected are doing the best they can with what they have, so there goes your premise.
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No, productive Alaskans are bombarded with “budget”, a small word for a big lie, demands for more money or else, a ransom demand if you will… we know the drill… roads get potholes, children get stupid, laws for the lower class don’t get enforced, government shuts down, etc., etc.
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Productive Alaskans won’t see a “budget” showing how things’ll look, for example, after the Alaska Municipal League returns its $630M “investment pool” to the State Treasury… can’t imagine why.
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Who spouts stuff like “We will not raid the Permanent Fund”?
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“We” won’t raid it. “We” have a lobbyist-legislator team who will raid it. “We” have the Communist Chinese who might raid it for collateral while building Alaska’s gas pipeline. “We” have buyers, including local governments, who spend $20M annually on lobbyists to lease or buy state politicians to get money, and now the buyers want what they bought, which may well include raiding the Fund to get.
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“We” have a two-tiered justice system, courtesy of our lobbyist-legislator team, then and now.
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What does that mean? The law says the governor can tell the legislature where to meet for special sessions, “We” saw how that worked out when peoples Imperial Senate President Giessel disapproved. The law says how to compute PFD’s. “We” saw how that worked out when Peoples Governor Walker disapproved.
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But “We” will have Lesil’s Law, vague, intricate, no accountability processes, in other words unenforceable, no mandate restoring private subsurface mineral rights when PFD’s go away, readily changeable by future legislators for their own purposes, fodder for generations of lawyers to fight over, all the while insulating our lobbyist-legislator team and our public-sector union-management teams so they can do what they do best.
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No more pitful prattle about “basic services”, please! Nobody in or out of government knows what so-called “basic services” should reasonably cost. What we do know is that overpriced, underperforming “basic services” will cost anything their respective union-management teams want to charge and nobody in his right might mind, who wants to do business in Alaska, will challenge them.
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No? Remind again where Alaska stands in public-education ratings; why in 2019 Alaska needs federal intervention to figure out how to combat violence against Native women; why plowing snow in Turnagain Pass is suddenly problematic, why medical help is often cheaper, more effective, and available, Outside; and on… and on.
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Don’t quit your day job, Lesil.
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