My Turn: A plan to end a regressive entitlement

  • By Rich Moniak
  • Friday, November 6, 2015 1:03am
  • Opinion

After 11 months of budget uncertainty, Gov. Bill Walker has taken the helm to offer a realistic solution to our fiscal crisis. His Sovereign Wealth Fund proposal should end the boom and bust budget cycles dependent on the price of oil before the state depletes its Constitutional Budget Reserve. The challenge for the Legislature will be to set aside political ideologies and give this idea serious consideration.

If the plan is accepted and implemented, every Alaskan can expect to see our Permanent Fund Dividend cut in half. That could lead to voter backlash against Walker and any legislator who supports it. However, people need to recognize this recommendation is not about taking the easy way out.

The sovereign wealth idea came from a study done by Walker’s Financial Opportunities Working Group. It was made up of representatives from his office and the departments of revenue and law. They were charged with exploring how much of Alaska’s Permanent Fund could be sustainably applied to state’s general fund. So yes, Walker was definitely looking to “touch” our beloved PFD.

But from an accountant’s perspective, the easiest solution would have been to eliminate the annual dividend entirely. That would have been political suicide for Walker though. His public popularity would have fallen so far that he’d have become a lame duck governor just one year into his term, so it was never even considered.

Opposition to this proposal will likely come from two directions. Those on the political right, who believe our government is still a bloated bureaucracy, will continue to demand budget cuts come first. However, as it seems most Juneauites understand, balancing the budget without new revenue is wishful thinking.

Meanwhile, liberals like Shannyn Moore are already expressing concerns that cutting the PFD will hurt Alaska’s most vulnerable citizens. Dipping into the Permanent Fund once “seemed like such an easy answer,” the Alaskan Dispatch News columnist admitted last weekend. Now she’s arguing it’s a regressive tax, especially for people who rely on it for food, housing and fuel. “The single mom with two kids working two jobs loses $3,000,” she wrote, “while the single multimillionaire loses $1,000. In what world is that fair?”

That’s not a good question though because the answer is obvious. It’s not fair at all.

But the inverse isn’t either. If fairness is based on need and nothing else, then it’s not fair that the single millionaire gets a $2,000 check from the state while the single mom in her example only gets $6,000 for her family of three.

Besides, it’s wrong to use the payout from the past two years to estimate how much we’ll lose by cutting it in half. The dividend averaged only $1,100 the five years prior to 2014. During that time, any family that was dependent on the PFD for food, housing and fuel were either underfed, on the street or freezing in their homes just because the fund’s earnings were too low.

Yes, cutting the PFD in half will have a regressive effect but based on the number of Alaskans living below the poverty level, the PFD this past year could be considered a regressive entitlement that distributed a half a billion dollars to the 90 percent of Alaskans who didn’t really need it.

My point is, if we’re really interested in helping the disadvantaged families in our communities, there are more direct ways to do it.

Establishing a living wage is one idea. Alaskans did vote to raise the minimum wage to $9.25 per hour and periodically adjust it for inflation. But at that pay, the single mom Moore described might still have to work two jobs just to stay above the poverty level.

Creating alternatives to payday loans is another. The very presence of these small lenders means many people are periodically struggling to cover the cost of basic necessities. Is it fair that very high interest rates and fees are attached to their only borrowing options, while most of us can get loans from banks offering much better terms?

Walker’s Sovereign Wealth Fund is a good approach to creating a sustainable state budget. The fact it will cause significant hardship to the most economically vulnerable should serve as a reminder that right now the basic needs of all Alaskans aren’t being met. And from that perspective, cutting the PFD for those of us who don’t need the extra cash makes complete sense.

• Rich Moniak is a retired civil engineer with more than 25 years working in the public sector.

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