Sen. Pete Kelly, R-Fairbanks, is very proud of the $418 million the Legislature cut from the budget this year. He says it’s real, just like the $330 million cut last year. He’s so proud he wants to come back and do it again next year. Which is why he won’t consider imposing new taxes on Alaskans.
In a way, Kelly did vote to tax us by supporting SB 128, which will cut our Permanent Fund Dividend in half. Reducing the annual entitlement will have an effect similar to one. Money that would have gone in our bank accounts will be redirected to state coffers and the Legislature will determine how it’s to be spent.
I’m not complaining by calling it tax. I think it’s a wise and necessary step toward making state spending sustainable. And it means the Legislative majority recognizes they can’t get there by cutting the budget alone.
But unlike the concept proposed by Gov. Bill Walker, they’re still refusing to consider new revenue. His plan was to take $3.3 billion from Permanent Fund’s earning reserves for the state’s annual operating costs and close the remaining $1 billion gap with a combination of new or increased taxes, cuts to oil and gas tax credits, and additional budget cuts.
SB 128 will allow the Legislature to spend 5 percent of the Permanent Fund’s total value which will only move $1.8 billion from the earning reserves into the general fund. That’s halfway there. For the rest, they’ll be dipping into the state’s reserves again while planning to come back and cut more again next year.
Why do they feel there’s more to cut? “We took nearly $400 million out of the day-to-day operations last year,” Kelly during a press conference in March. “Essentially nothing happened. Government continued to function.”
That’s his proof state government is still too big. But while there wasn’t a shutdown, it’s still too soon to recognize if public services were negatively impacted or if the cuts actually exacerbated inefficiencies.
Beyond state operations is the fact that much of the private sector economy is highly dependent on state spending. The delay between budget cuts and impacts on that side will be felt further down the road. That’s especially true for the capital budget, which was reduced 75 percent last year, while the construction industry continued to work on projects from prior year funding.
And what happens if they cut too much? Kelly thinks that’s not likely, but if it happens, he said “we can come back next year and fix it,” further showing his inability to recognize the time lag between passing a budget and the impact it has on Alaskans.
“Sometimes I think I know too much,” he quipped during another press conference three years earlier. If he actually believes that then he’s part of the problem. Anyone who thinks like that loses the ability to effectively listen, learn and compromise for the greater good.
Kelly made that remark after voting to replace ACES with our new oil tax law. That was supposed to ensure a sufficient increase in oil production which would generate the revenue needed to fund state operations. But those who thought they knew it all then obviously didn’t anticipate the drastic decline of oil prices.
It’s not that ACES would have saved us. It’s just that Kelly thinks anyone who disagrees with him is a “left leaning politician” whose best work is to “transfer wealth from the private sector to government.”
ACES certainly did that, but only when the oil companies were reaping record profits from high prices. The irony is Kelly and his cohorts think it’s fine to balance the budget by siphoning off the reserves largely built up by ACES.
But since the state income tax was repealed in 1980, our government essentially stopped taking money from its citizens. It’s been said countless times since this crisis began that Alaska’s personal tax burden is the lowest in the country. It’s only half of New Hampshire’s, which has the next lowest, and just a quarter of the national average. And the non-partisan Tax Foundation ranks our state as having the third best business tax climate.
None of this matters to Kelly. The philosophy that guides him is that the size of government will never be small enough. And he’s not willing to consider new taxes to pay to run it because he’s having too much fun showing us how much he thinks he knows.
• Rich Moniak is a Juneau resident and retired civil engineer with more than 25 years of experience working in the public sector.
