On Tuesday, the Democrat-controlled House Finance committee made a budgetary end run to use a portion of the Alaska Permanent Fund Earnings Reserve as a patch for the State’s budget hole. And it also capped the Permanent Fund dividend at $1,150.
Essentially, this drained the Permanent Fund without a single public hearing.
House Republicans despaired: In one fell swoop, without any subcommittee process or public notice, Democrats moved an amendment to the operating budget to take $4 billion out of the Earnings Reserve and cap the dividend.
It was far more than what would be needed to balance the state budget. It was also taking money out of the state’s high-return investment account. And it was the clearest signal yet that Democrats won’t allow further cuts to state programs.
The Earnings Reserve is where the Permanent Fund puts the gains it makes off its investments. It, too, is invested and has earnings.
But using the Earnings Reserve has an unexpected consequence: It would prevent Republicans from being able to make any further budget cuts as it removes their one big leverage tool: The Constitutional Budget Reserve, where legislators usually turn for a budgetary fix.
The move is a stunning reversal from two years ago, when House Republican leadership proposed tapping the Earning Reserve Account to prevent House Democrats from growing the budget. Republicans tried to move funds out of the Earnings Reserve as leverage to shrink the budget. The deal was blocked by what’s known as the Musk Ox Caucus of Republicans, who have now joined with Democrats. Now, that move is being used by the Democrats and Musk Ox to grow the budget.
Two years ago, Reps. Paul Seaton and Neal Foster, who now co-chair Finance after igniting the political coup against Republicans, signed a letter saying they couldn’t possibly support using the Earnings Reserve Account.
Their letter in 2015 said, “On behalf of our constituents, we feel compelled to express to you our serious misgivings regarding a plan to transfer funds from the Permanent Fund Earnings Reserve as part of the mechanism to fund the Fiscal Year 2016 Operating Budget.”
The letter was also signed by Reps. Gabrielle LeDoux and Louise Stutes, the members of the so-called Musk Ox Coalition who later joined with House Democrats to overthrow the House Republican Majority.
The letter from these Musk Oxen then continued: “We fear that resorting to Permanent Fund earnings so suddenly as part of a solution to the impasse will sow grave confusion and mistrust among Alaskans. Furthermore, we strongly believe that major actions having to do with the Permanent Fund, such as this, should go before the voters.”
What a difference two years makes.
This year, as Democrats have taken charge in the House, they have reversed themselves and are doing exactly what they objected to two years ago.
“If you have any hope of being part of the budget process and forcing reductions to the footprint of state government, it is essential that you testify during this week’s public testimony,” wrote Rep. Cathy Tilton, a Republican from Wasilla-Chugiak, who expressed dismay at the process on her Facebook page.
However, the Democrat-controlled Finance Committee is not allowing amendments from the Republican members until after all the public testimony time has run out. The Republican amendments have been segregated out, said Rep. Charisse Millett, and will not be fully part of the public process. That makes it unlikely the public will know enough about them to provide comment.