Proposed plans for resolving the Alaska fiscal crisis have one thing in common: They treat our crisis as one big math problem. Unfortunately, how we solve this problem will have long-term implications for public policy (i.e. who benefits from and who pays for government services), the cost-of-living for families in our state and whether future Alaskans will share in the wealth created by one-generation’s extraction of our most valuable resource – oil. Additionally, one might wonder if our solution to the fiscal crisis leaves us a government that is accountable to the will of the people, not just now, but into the future.
Imagine for a moment that the Prudhoe Bay oil era had never existed. Surely, we would now have a very different budget than the one we presently argue over. For 37 years, citizens of Alaska have largely not had to pay for their government services. Legislative budget-making has been a function of how much oil revenue flowed through government coffers each year. Little concern was expressed for how we could afford new programs and policies once the oil money was gone. Alaskan citizens paid scant attention to government expenditures because it only involved oil money, not taxes. After three decades of relying on oil money Alaska spends about $14,000 per capita on government programs while all other states spend about $5,000 to $7,000 per capita.
Clearly, we now need a budget much more like one that we might have, had the Prudhoe Bay era never happened. This means that the Legislature needs to re-examine every program and policy represented in the budget and determine if we can really afford them in the context of normal revenue sources like a state income tax and sales tax. By all rights, the Permanent Fund Dividend shouldn’t be needed; other states pay for government services without a Permanent Fund.
Unfortunately, we don’t have income or sales taxes in place and re-evaluating every budget item takes time, likely years, after all it took decades to create our current budget. How do we buy time for intensive deliberations regarding budget items that benefit powerful constituencies? Unfortunately, the answer is Permanent Fund earnings; there is no other pot of money large enough to draw on while we restructure government. The alarming problem is that current proposals want to make permanent changes in who owns the earnings of the Permanent Fund as though our “crisis” is permanent.
Surely, Alaska will not always be in a state of fiscal crisis. Surely, we can reconfigure government within our ability to pay for government services by conventional taxation. I propose that we agree to split Permanent Fund earnings with our government for 10 years, giving us time to reform our budget.
Current plans ignore former Gov. Jay Hammond’s declaration on announcing the PFD program that Permanent Fund “oil wealth belonged to Alaskans themselves, not the government.” Current proposals conceive of Permanent Fund earnings as “government money” not “the peoples’ money.” Nevertheless, the state’s fiscal crisis belongs to all of us. Consequently, I propose that we the people support a state income tax, a modest sales tax and share our Permanent Fund earnings for 10 years. Then the burden of reforming the budget will fall to our Legislature.
Plans that make permanent government draws from Permanent Fund earnings essentially lock-in the current budget as though it is ideal for Alaska or that its design exemplifies decisions we would have made if Alaskans were asked to pay for it all along. Obviously that is not the budget that we have today.
Accountability in Legislative budget-making comes from the tension that normally exists when lawmakers must tax citizens to pay for government programs. A direct draw from the Permanent Fund earnings means that perhaps $3 billion can be spent each year by government with about as much concern from taxpayers as Alaskans expressed over the last 37 years of spending oil money. It’s that lack of accountability that explains why Alaska government expenditures are two times what other states spend. We can restore that tension, that accountability, by beginning to pay for our government services. Most importantly, let’s find a solution that ultimately preserves ownership of the Permanent Fund by the people.
Alexander Hoke is a 41-year resident of Alaska, currently engaged in property management and construction. He is formerly a legislative policy analyst, president of a rural electric utility and member of the City and Borough of Juneau Assembly.
