I have attended over a dozen forums plowing ground which might be thrown into the fiscal gap. Unfortunately, little but dust was stirred up. That recently changed.
At a seminar held by Common Ground and others there was growing consensus: 1) The CBR should not totally exhaust; 2) Fiscal constraint should be imposed; 3) Cuts alone will not bridge the gap; 4) The Permanent Fund should help out) 5. A broad-based tax will be needed.
Questions remaining were how each point should be implemented. Some proposed a constitutional spending cap. Others saw hazard therein. Some favored a POMV endowment proposed by the Fund's board. Others felt that language failed to assure fund inflation proofing the fund or bullet-proofing dividends and therefore voters would never approve. Some favored an income tax. Others, a sales tax, contending income taxes penalized productivity and redistributed wealth. Others felt any broad-based tax was premature.
Since our future depends so much on oil pricing, development, the stock market and other imponderables, a flexible means of addressing all those concerns would be to draft an "insurance policy" which prompts fiscal constraint; defers broad-based taxes until or unless needed; sets a CBR depletion level at which point most Alaskans would agree they were needed; yet recognizes good fortune may halt that need through new development.
Such policy's terms are: 1) Put an endowment amendment before voters which fully inflation proofs the Permanent Fund while prioritizing dividends; 2) Set a point beneath which the CBR can not exhaust without triggering corrective action (threat of such action alone would be a major fiscal constraint); 3) Place before voters the question: "Which, if needed, is least objectionable: A sales tax or an income tax, perhaps "capped" at no more than one's dividend, to be uncapped only by public vote?" If other fiscal gap "fill" flows in through development and such tax is no longer needed to keep the CBR healthy, that tax should decline automatically.
The above "policy" could provide hundreds of millions in "fill" without effecting dividends one whit. Also it would greatly extend time for development to supplant need for the tax. Happily for legislators, there's little political pain. Voters would vote on an endowment. Moreover, any potential broad-based tax voters preferred would only trigger if things degenerate to where most Alaskans will agree it is necessary; thus if ever required, its impact would be well past the next election.
Of course, those who hate dividends will oppose. If they can delay until the CBR is dry, dividends will also evaporate and the door to the Permanent Fund swings open. Escaping will be any immediate need for fiscal constraint or unpopular taxes. That's Nirvana for politicians who care little about your children's future.
I've met with interest groups, many legislators, Senators Tillion and Halford, the governor and his staff. All helped evolve the above "policy" which meets every concern I have heard.
Its keystone is a proper endowment. Previously I suggested language which failed to assure inflation proofing: i.e. if inflation were over 3 percent, the Fund's market value could erode. Also, it was unclear if any dividend could be paid if the Fund's market value increased by less than 5 percent. The following suggested language clarifies:
"Only when the market value of the Permanent Fund, after full inflation proofing, has increased over the previous year, may the legislature appropriate such increase up to 5 percent of the Fund's market value. No more than - thereof may be only used for mandated education or health care. The remainder shall be directly distributed in dividends to every qualified Alaskan. However, the amount so distributed shall not be less than - the Fund's realized gains averaged over the previous 5 years, unless otherwise provided by law approved by a majority vote of all dividend recipients." (Or a two-thirds vote of all registered voters).
Why a two-thirds vote on using the difference between one-half of any fund appropriation for dividends and what "shareholders" would have received under the current formula (allegedly about $600 more in a few years...and growing)? First, it would keep promises that voters would be polled before their potential dividend dollars could be used for other purposes. Second, since most shareholders, minor children, can't normally vote, a simple majority vote cast by only registered voters might favor usage while an actual majority of "shareholders" opposed. It would be simple to require such a vote on one's dividend application. (Parents to "proxy" vote for pre-schoolers?) Certainly nothing could do more to curb voter apathy and promote civic mindedness in our children.
Study the above endowment language carefully since, hopefully, you may get to vote on something very much like it next November.
Jay Hammond is a former governor of Alaska.
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