Alaska’s legislators took a large step toward closing the budget gap, and we can finally sigh with relief. Because, from 2013 through 2017, legislators chose to drain the state’s budget reserves to keep the government moving. During that time, the statutory and constitutional budget reserves lost a combined $14 billion. Now the reserve has only $2.4 billion left.
On Tuesday, Gov. Bill Walker’s Senate Bill 26 passed, 13-6, in the Senate and 23-17 in the House. It allows for a portion of the Alaska Permanent Fund earnings to be used to fund the state’s operating budget and the annual Permanent Fund Dividend. Studies of the permanent fund have shown that up to 5.25 percent of the $65 billion fund’s five-year market value can be drawn annually and maintain a sustainable permanent fund. So, for the next three fiscal years, 5.25 percent of the market value could be used to fund the operating budget and pay dividends.
Starting in 2022, the state can only take 5 percent of the permanent fund’s market value each year.
This first draw for fiscal 2019 will take $2.7 billion. About $1 billion will be used to pay out a $1,600 dividend.
The rest will go toward the operating budget.
Gov. Walker deserves kudos for his leadership in addressing Alaska’s financial crisis, as do the legislators who voted for the bill.
No doubt some Alaskans will be gnashing their teeth over this bill passing. Dividends will be smaller than they could be as a result. And, it being an election year, politicians and hopefuls promising to restore a full dividend.
To anyone who is running for office and suggesting repealing SB 26 in favor of a full dividend, what is your solution to the state’s budget trouble? Without SB 26 Alaska’s financial situation would be dire. A small sales or income tax could be part of a state fiscal plan but would not come near to being a solution.
Voters should be wary of promises to restore a full dividend.
The bottom line is that passage of SB 26 is a positive step.
—Fairbanks Daily News-Miner, May 13, 2018
