OPINION: Legislature misses chance for immediate help to Alaskans
Faced with the biggest threat to Alaska’s economy in state history, the Legislature failed to meet the moment with a move that would have offered the most immediate relief.
The operating budget approved after midnight on March 29 stripped out a supplemental $1,000 dividend payment originally added in the Senate and did not move up the traditional date for distributing the PFD from October while setting the amount at $1,000 per Alaskan.
Rather than paying Alaskans a distribution from the Permanent Fund Earnings Reserve to help them pay their bills, the Legislature’s solution was to make it illegal to collect bills for three months.
Such a scofflaw strategy isn’t surprising after five years of the Legislature avoiding tough decisions by simply not paying bills whether it has been the statutory PFD formula, oil tax credits or its own lease on the office building it commissioned.
Instead of taking advantage of Alaska’s unique financial position to help itself, the Legislature is doing another thing it does well: relying on the federal government to foot the bill.
Congress passed the CARES Act with a $1,200 per person and $500 per dependent appropriation for certain income levels, and added $600 per week to those now forced into unemployment.
That is apparently good enough for the legislative leadership that negotiated the conference committee budget.
Paying a supplemental relief check or an early PFD would have required exceeding the 5.25 percent of market value draw from the Permanent Fund, which is the only law the leadership treats as binding.
Adhering to the formula is backed by the Permanent Fund Board of Trustees, but much like the laws it passes, the Legislature also picks and chooses what advice to follow from the board.
On March 5, the board passed a resolution calling on the Legislature to take one of two actions: either combine the principal and the Earnings Reserve account into one with a fixed 5 percent annual draw, or failing that to maintain a balance in the ERA of at least four times the annual draw that would be roughly $12 billion.
Given the rapidly unfolding circumstances of the coronavirus spread, there was no chance of attempting a lift that would be difficult in the best of times such as combining the Permanent Fund accounts.
However, the Legislature gave no thought to reversing the $4 billion transfer from the ERA to the principal approved last year, and even went a step further by appropriating another $1 billion to the corpus under the nebulous purpose of “inflation proofing.”
If Gov. Mike Dunleavy doesn’t veto that $1 billion transfer — and he should — the total budgetary and supplemental transfers out of the ERA would likely lower its balance to less than $7 billion, or just about half of what the Board of Trustees recommended.
After attempting to move $9 billion from the ERA to the corpus last year (Dunleavy vetoed $5 billion of that), the need to move another $1 billion for “inflation proofing” doesn’t hold a colander’s worth of water.
What it looks like is the legislative leadership is tired of hearing from constituents and the governor that “the money is there” in the ERA to pay Alaskans a statutory dividend or even a supplemental “true-up” to the 2019 check.
By refusing to follow the Permanent Fund board’s advice to keep a 4-times buffer in the ERA, and in fact taking affirmative action to reject it with the latest $1 billion transfer, what it looks like is the leadership is attempting to starve the PFD out of the budget.
Moving $5 billion to the untouchable corpus of the Fund at a time when Alaska is staring down economic ruin is actually far more irresponsible than paying a supplemental dividend.
Our two sources of revenue — oil and investments — are being hammered in tandem. New projects that promise thousands of jobs, hundreds of thousands of barrels per day and billions in revenue are on hold.
Our biggest private sector employer — fishing — is likewise in limbo with nearly three-quarters of its harvest typically bound for restaurants that are now shuttered across the globe.
Our one bright spot in the recession — tourism — is on the brink of having no cruise season based on federal distancing guidelines, Canadian restrictions and one headline after another about outbreaks on ships that will surely discourage travelers even if sailings begin.
Those four industries alone account for more than $10 billion in state revenue and economic activity, to say nothing of the destruction of the state’s hospitality sector that is also ongoing through mandated government closures.
In their effort to save the Permanent Fund from themselves by slashing the ERA balance, this Legislature is taking financial options off the table that other states would love to have, and ones we may yet need.
Andrew Jensen can be reached at [email protected].