Going to be a rough year - Must Read Alaska
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Thursday, February 20, 2020
HomeAlaska Daily PlanetGoing to be a rough year

Going to be a rough year

ANCHORAGE DAILY PLANET

It is noteworthy that a Republican lawmaker from Fairbanks wants to double Alaska’s gasoline tax – currently the lowest in the nation – to 16 cents a gallon.

It also is worth noting that the $35 million such a levy is expected to bring the state is a drop in the proverbial bucket and will not do much to close Alaska’s $1.5 billion budget deficit.

We have, because Alaska’s deficit problem is so huge and complicated, and its resolution so potentially painful, entered the realm of nickel-and-dime taxes that will do little in the overall scheme of things to fix our fiscal mess. Sure, they will make it look as if the Legislature is doing something, but the reality is that it is not doing much.

Aside from tax sleight of hand, there are only a few ways out of the current budget mess: Sacrifice the Permanent Fund dividend to support government spending; enact broad-based taxes such as income and sales levies; cut government spending to match income; or, mix and match those in some fashion to make ends meet. None of those will be an easy choice.

When Gov. Mike Dunleavy last year took a meat ax to the budget to bring it close to Alaska’s revenue reality, the screaming and moaning from the Left and those addicted to government largesse triggered a recall effort that is ongoing. This year, the governor, warning that time is running out to fix the state’s fiscal mess, dropped the ball in the Legislature’s lap. So far, no action other than the fuel tax proposal.

The jig is up and the status simply cannot remain quo. With the state’s savings drawn down to a dangerous level after years of poor public policy decisions and living high on the hog, this year is a year of reckoning for Alaska. Unfortunately for lawmakers, it also is an election year.

They will have their work cut out for them in coming months. Before it is over, we suspect we will see which of them supports government – first and foremost over the interests of Alaskans.

It may not be pretty.

Read more at the Anchorage Daily Planet.

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  • Very very sad that all states seem to be operating in the red and the sheep just let it continue. Those who are not fiscally responsible will pay a heavy price, no matter how sugar coated it is fed them. We need better politicians, they absolutely suck. “The people” need to take a much more proactive, responsible step at bringing their own states budgets in line and stop listening to what sounds so easy and that is debt. Who goes out abd spends 30% of their annual income on credit cards? Get real folks

  • Actually it is an easy choice…cut spending to match income, like every organization that isn’t government and household does.

    • David Brown, if that’s unattainable, what then? Our current administration offered some cuts in the right direction, then completely blundered their way through the budget process with both bodies. The lack of political savvy was downright embarrassing.
      In the end the Administration was able to maintain some fairly substantial cuts, but there is currently a fairly large supplemental out to fill unforeseen shortfalls in the budget. Add that number with added cost to our corrections and legal departments and the “cuts” shrink considerably.
      Revenues will be needed, I can only hope our legislators lack the gall to throw an income tax at myself and the rest of the Alaskan workforce in the name of maintaining a pfd, which unfortunately appears the way we’re headed.
      LEGISLATORS: I know the “PFD before everything” groups and the “please tax me”groups are both extremely loud, but taxing working Alaskans to maintain the ability to hand out dividend checks is insanity. Just some thoughts from a working Alaskan enjoying my low taxed life in this great State.

      • Alaska is barely getting out of a recession. There are an awful lot of workers who still get minimum wage. Are these the people you think need to pay an income tax?
        .
        I vehemently oppose an income tax until our legislators can figure out how to bring more job opportunities into Alaska. Cutting the corporate tax rate (currently one of the highest in the nation), may help. More jobs would also (hopefully) give workers higher wages. And when people are working, the need for Medicaid and welfare goes down, too. More jobs also tends to lower crime, so less corrections would be needed.
        .
        There’s also a lot of duplicated or unneeded government programs that could be cut. It’s truly shameful that the legislature was too busy demeaning Dunleavy last year instead of working with him. If the legislators had did their job and actually worked instead of playing politics, maybe last years cuts would not been as horrible, or better cuts could have been hashed out.
        .
        In the meantime, no one if stopping you from writing a check to the State Department of Revenue. You can determine whatever you think your income tax should be and write that check weekly, monthly, or even yearly. Lots of options!

  • The ERA (Earnings Reserve Account) had realized Earnings of 7.5 billion last year. No one is talking about it. The POMV will bring in 3.1 Billion with its 5.25% draw. How much does that leave on the table ? The 5 year average is at least 4 Billion. The Earnings Reserve Account is holding about 17.9 Billion. That’s after taking 2.9 Billion out for the POMV and transferring 4.0 billion into the fund Corpus via a “special appropriation” last year. The Legislative Finance Committees are hoarding the Earnings, plane and simple. We have more than enough to pay a full Dividend and close the deficit. Where are the audits we need to target the Budget Cuts ? We are actually in a very good situation, with many billions to spare. No, the nickel and dime taxes are not the solution, just more political games. The Legislative Finance Committees need to take their heads out of their collective sand. They have more money than they know what to do with ! It’s true ! And it’s sitting in the Earnings Reserve Account.

    • You are arguing to draw more than the 5.25 %(down to 5.00 % this year?) from the Total Value of the Permanent Fund (Corpus plus the PFER) which would be against the principle of the Percent of Market Value investment philosophy.

      I oppose this above-POMV approach in general. Obviously it should not become a regular course of action or the PF will dwindle before our eyes.

      Last year we would have had a “balanced” budget if the Dividend had been held to $900. However, we continued to ignore our Capital Budget needs and our obligation to (begin to) re-pay the CBR for the $14 Billion “borrowed” from it.(see AK Constitution).

      Assuming the Legislature budget cuts this year are a less than many hope (for example last years “cut” is now canceled out by the forthcoming supplemental appropriation).

      Assuming a relative status quo, perhaps we can balance the budget by providing a Dividend of around $700. But even at that, the budget is still not truly balanced for the reasons described above. Ultimately, we must live without any Dividend at all and I think Alaska will be better off without it. I know this is unpopular but as the CBR is at a dangerously low level, there is no other choice assuming no other significant cuts or more income from oil tax increases.

      Regarding new sales or income tax, I oppose these alternatives until the dividend is ended. I maintain such a “tax and dividend” concept would be found unconstitutional under Alaska Constitution Article 9, Paragraph 6.

      Finally, I do make an exception to my opposition to drawing above 5.25% from the PFER:
      1. Pay a “final” Dividend of $3000 this year. This will require $2-3 Billion above POMV.
      Suspend the Dividend thereafter indefinitely until we get our financial house in order. This “boost” this year will help Alaskans adjust to the new reality.
      2.Pay off the past oil investment tax credits This will require $1 Billion above POMV. This may help our economy by providing the oil companies with needed capital. It has to be paid sometime – lets do it now.
      3. Transfer $2 Billion (above POMV) from the PFER to the CBR. Also, begin annually paying a few hundred million a year back to the CBR from within the POMV Cap.

      This plan will reduce the Total Value of the Permanent Fund by an additional $5-6 Billion but set us up for a sustainable future. Ironically, it appears we do agree on raiding the PFER – we would just do it differently! Cheers

      • IMO: All the different “piggy-banks” are an deliberate artifice to make it difficult, if not impossible to audit the State’s actual cash reserves.
        Nobody, not even the bureaucrats, know exactly how much money is floating around, getting “tapped” into someone’s pockets.
        They don’t even care, just as long as their own petty fiefdoms, their cash-cows, are left alone.

        • Not sure about those bureaucrats but the legislators get their information from the Director of Legislative Finance who does know where the money is-she (Pitney) was recently hired @ $225k/year to keep them informed.

  • Alaska-like all Western States has been captured by the federal government with unConstitutional Statehood agreements, and overreaching federal taxation, despotism and tyranny. Alaska is a ‘State in waiting’ and will fail like many others if it doesn’t regain the ‘Security of a Free State’ that comes with Constitutional jurisdiction and Sovereignty. The money game is rigged to fail by the private federal reserve and is bleeding the Country, and it’s State’s to death. The federales in their quest for control, have lost control and are now totally out of control. It is time for the States to control their federal government🇺🇸

    • I second that!

    • Jay, respectfully, you’re off bubble regarding productive federal lands in Alaska.

      The state owns the overwhelming majority of the mineral-rich lands (save NPR-A, which was considered a strategic asset and was never going to go to the state, and ANWR, which was a reserve before statehood). Even in those two cases, half the royalties go to the state with the state not having to lift a bureaucratic finger.

      For the lands that fall under the Mineral Leasing Act, Alaska gets 90% (think Cook Inlet federal leases).

      I believe the reason the feds own so much land is because the feds bought it all from Russia (existing private lands aside). Congress (the constitutional body of duly elected legislators of the then-existing 48 states) gave so much land to the state because they wanted the state to be self-sufficient.

      If you think Alaska got a raw deal, bring it up with the Alaskans of the time who agreed to the terms, and don’t forget to tell someone from Nevada our woes (very little state or private land there).

      • The Feds own roughly 80% or 56 million acres in Nevada, they own a little more than 61% or 224 million acres in Alaska, that’s 4 times as much area as Nevada and an area the size of Texas and Kansas combined. The Feds also still owe about 4 million acres to Alaska, an area greater in size than the State of Connecticut. There are still about 35 million acres that have only been tentatively approved for transfer to the State of Alaska an area that is bigger than the State of New York and would rank 27th in size if it were a state.

  • Is there anyone who really knows the exact amount there is in all the accounts? We used to require a balanced budget..then debit became the way..Never works to borrow and keep borrowing!

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