AJOC EDITORIAL: Gov. Walker gets chance to bite the bullet on the PFD

Gov. Bill Walker has said repeatedly he’s willing to take the hit for reducing the Permanent Fund Dividend as a partial solution to the state’s budget deficit, and it looks like he’s going to get that chance.

The Alaska House of Representatives adjourned the latest special session on June 18 one day after the Finance Committee failed to advance Senate Bill 128 for a floor vote.

SB 128, which passed the Senate 14-5, would have ensured a $1,000 dividend for the next three years and contributed about $1.8 billion toward reducing the fiscal year 2017 deficit.

The version that failed in House Finance would have guaranteed a $1,500 dividend the next two years and $1,000 in the third, but even that sweetener wasn’t enough to get six votes.

So Walker has called the Legislature back once again for a fifth special session to begin July 11, but it is hard to see anything that will change attitudes toward a reduced PFD in the House between now and then.

Walker doesn’t have a lot of good options, but he’s not up for reelection until 2018. That gives him a chance to put his veto pen where his mouth is.

If the governor wished to leverage funding that is important to the House minority Democrats, he could begin by line-item vetoing budget items dear to their hearts such as increases in the Base Student Allocation, pay raises for state employees, the University of Alaska System and the like.

“We can’t afford x, y and z if we’re going to spend $1.4 billion on dividends every year,” Walker could say, and put it on them to explain why they would rather keep the PFD at an unsustainable level than support education or health care or their union constituency.

Walker has said, though, that he’s not interested in those kind of games and his lack of acuity for deal-making has already become self-evident during his first two years as governor.

A simpler fix, one that would allow the House to become the heroes of the dividend and allow Walker to make the fiscally responsible call, would be for the governor to veto the PFD appropriation down to a level that would pay his preferred amount of $1,000.

With the Senate on his side, the House could not override the veto on its own even if the members could muster 30 votes. Walker wouldn’t get his plan, but at least he’d be saving about $750 million the state is going to need sooner or later.

That would leave the House with a choice.

Pass the House Finance version with the $1,500 PFD for two years while incorporating the annual draw from the Earnings Reserve, or go home and campaign against a governor who isn’t up for election for cutting the PFD.

The problem with the latter choice is House members would have to explain why they didn’t vote to increase the PFD when they had a chance and let the mean ol’ governor take their hard-earned money instead.

If the House finally passes the modified SB 128, they would be able to at least campaign on standing up for the PFD, and achieving a smaller cut than the governor and the Senate proposed.

They’d still be free to rail against oil tax credits and megaprojects and all the other Democrat bogeymen lurking under your bed, which is all they really care about, but at least the state would have done something to get its fiscal house in order.

And in the end, cutting the PFD to $1,000 or $1,500 isn’t going to hurt the state economy very much, if at all. Consider that in 2015 the PFD appropriation of $1.2 billion represented 2.2 percent of the Gross State Product of $52.8 billion.

If the GSP is relatively similar this year, cutting the PFD by either $375 million or $750 million would represent 0.7 percent to 1.4 percent of the total state economy.

The only peaceful solution to this standoff is one that lets everyone save a little face. Allowing the House to vote to increase the PFD after a veto may give both sides what they want.

Andrew Jensen can be reached at andrew.jensen@alaskajournal.com.

 

Updated: 
06/22/2016 - 4:31pm

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