GUEST COMMENTARY: Private sector can build bridge to better economic future
How many special sessions in one year does it take for the Legislature come up with a plan to stem Alaska’s economic decline? Obviously not four, the new record set this year.
After nearly three consecutive years of recession, legislators remain divided over whether it’s better to raise taxes or cut government spending. While they argue, jobs, revenue and families continue to depart in a southerly direction at a worrying pace.
All of that makes the quickness at which some dismiss obvious answers to the deficit problem worrying. We aren’t the only state facing a budget deficit, but we are the only state sitting on a $62 billion rainy-day account that could provide some of the money we need to see us through the hard times.
It is a step forward that more lawmakers acknowledge the potential of using a portion of the Alaska Permanent Fund’s earnings reserve to help pay for government. But rather than placing an outright cap on dividends, Juneau should be looking at the percent of market value, or POMV, proposal to preserve both the potential for increasing dividend checks as well as providing for public safety and other essential state services.
POMV was formerly hailed as an assault on the dividend, but today we have an arbitrary and artificial cap — one that impacts the most-needy residents and, frequently, rural Alaskans the most.
How much more can we inequitably squeeze our villages before there is no more rural Alaska? POMV was a good idea when Gov. Frank Murkowski proposed it in 2004, and it’s still a good idea today. But that recognition has yet to result in the kind of bipartisan bargain that’s needed to move the needle in Juneau.
Touching the Permanent Fund remains a third-rail issue for many. No one wants to kill the golden goose that’s paid out more than $21 billion in dividends since 1982. But while it will take time to convince voters of the benefits of such a plan, there are clearly options for resolving our current revenue crisis by encouraging diversified private-sector investment.
And let’s be clear, what we face is a short-term revenue crisis brought about by low oil prices and overspending. As oil prices rose after 2006, we collectively forgot about the economic challenges we faced just a few short years earlier. In the interim, government became bloated, including handing out an “energy rebate” rather than saving for today, and making short-sighted gasline commitments that cost us $65 million.
As bad as our current situation is, it is not permanent or fatal. New investment from the private sector and greater diversity in the types of industries that invest here can provide long-term economic stability.
Alaska ranks 49th on Forbes’ list of best states to do business, based on costs, availability of qualified labor, regulatory and economic risks, and quality of life. Only West Virginia ranks lower. According to Forbes, Alaska’s economy shrunk faster than any other state over the past five years, net migration out of the state ranks second worst ahead of only Illinois, and the employment outlook is the worst in the country.
Businesses aren’t investing because they aren’t sure what the Legislature is going to do next. If we want to avoid another series of special sessions in 2018, we need to adopt policies this winter that encourage private-sector investment.
In the meantime, we need a bridge.
Rep. Don Young, Sen. Lisa Murkowski and Sen. Dan Sullivan deserve huge accolades for opening the 1002 area to exploration, but it will still be years before we receive royalty revenue.
It took almost nine years from the discovery of Prudhoe Bay to the first oil in the Trans-Alaska Pipeline System in 1977, and that was during a time of national emergency due to the oil crises.
We don’t have to construct TAPS this time around, but we are more focused on the potential environmental impacts, climate change, and the ensuing environmental regulatory hurdles to ensure that the 1002 area is developed with the utmost sensitivity and respect.
Determining what a “fair” rate of return is for our natural resources is also a difficult question — and probably the wrong one. Instead, we should be asking ourselves how we can encourage more companies to come to Alaska to create jobs exploring for new sources of oil and gas, gold, zinc and rare earth minerals. Stable job creation counts as much or more for our economic future than royalty income.
Tourism is great, but it is a short summer season when Alaska is an eco-Disneyland, and then those tourism dollars — and many seasonal tour business owners themselves — head south with the snowbirds. Similarly, how much of our fishing fleet and fishing dollars end up in the Lower 48? We need economic value that applies year-round.
Instead of focusing on the future, we may be focusing too much on filing today’s fiscal gap. That has led to multiple proposals to impose new taxes on working families, themselves struggling in this anemic economy. While the tax issue was mostly ignored in the last special session, it is now resurrected.
The question of how to fill the gap is a difficult one. Spending should be cut, but the formulas federal agencies follow to determine how many dollars Alaska gets can penalize the state if it doesn’t provide a match for certain programs. Leaving federal dollars behind is just as short-sighted for our economic growth as is permanently locking up resource development opportunities.
An income tax puts more money in the government’s pockets, not the pockets of Alaskans.
Artificially capping the PFD carries its own set of risks: it hits lower-income households, including many families in rural villages, the hardest. Instead, we need to be taking a hard look at POMV, and do everything in our power to encourage private sector investment, even if that means more Alaska reality television shows.
Rob Corbisier is an environmental and natural resources attorney at Reeves Amodio in Anchorage. He was an assistant district attorney from 2007-2012, and a special assistant to Gov. Frank Murkowski.