The following editorial first appeared in the Fairbanks Daily News-Miner:
Don’t start spending the “other half” of your 2016 Alaska Permanent Fund dividend check yet. A judge last week ruled in favor of the state, finding that Gov. Bill Walker was acting within his authority when he vetoed part of the allocation for the annual disbursement to qualifying state residents. Undeterred, Alaska Sen. Bill Wielechowski, D-Anchorage, says he will pursue an appeal. But regardless of how the case is ultimately resolved, the state’s budget situation is untenable, and the new Legislature should waste no time in rectifying it.
The question of whether Gov. Walker has the legal authority to partially veto the dividend allocation is a good one, and resolving it is in the state’s best interest. While it’s hard to imagine the governor taking the step except in extreme circumstances, as happened this year, the dividend constitutes a massive outflow from state coffers. Knowing whether that sum is subject to the governor’s approval will affect future budget negotiations and could prompt an attempt by legislators to restrict or remove the governor’s ability to veto it.
If the state is ultimately forced to pay out the roughly $667 million the governor vetoed from this year’s dividend distribution, it would make quite a few Alaskans happy while at the same time worsening the state’s fiscal crisis by further depleting shrinking savings accounts. That’s why it’s imperative that the new Legislature end the failure of the prior Legislature during the past two years to make great progress toward a balanced budget. The obfuscation, foot-dragging and delay have already cost the state in jobs and in its credit rating. And while revenue measures such as restructuring the permanent fund’s earnings may not be especially popular, their necessity is obvious to anyone who takes a serious look at the state budget situation.
Gov. Walker and the Legislature have done what they can with cuts during the past two years, in keeping with the widely held notion that government is too big and needs to trim the fat. But after two years of cuts alone, there’s precious little fat to be cut that won’t affect essential state services such as education, transportation and public safety — and the budget gap is still gaping wide, with a deficit of more than $3 billion per year. Closing the gap through cuts alone is impossible. Closing it through revenue measures will be difficult but possible, and that’s why the new Legislature should act quickly. The first item on its list should be restructuring of permanent fund earnings to provide a steady stream of income to pay for services in the wake of declining oil revenues. This won’t solve the deficit on its own, but it will do more than any other single measure and will go far to preserve a dividend for residents. Absent such a change, the dividend will be mathematically eliminated in about two years.
The path to a balanced budget won’t be easy. One way or another it will involve Alaska residents paying our way as we haven’t had to before. But running a $3 billion deficit while residents receive $2,000 apiece per year and pay no personal state taxes would be considered lunacy by any government in the world. Our free ride has been over for two years, though the last Legislature didn’t acknowledge it through meaningful revenue action. The new Legislature, when it gavels in for session in January, should acquiesce to that reality.
