Senate continues to be the only thing standing between Alaska and a fiscal plan

The Anchorage Daily News has a story today with Senate Republicans acting as if they've won Olympic gold, claiming that recent developments have proven they have been right all along in opposing taxes in Alaska.

Recent developments prove nothing of the kind. Volatility and uncertainty are the words that best define our situation. The Permanent Fund has lost $2 billion since Feb. 1.  Oil prices are unsteady. Alaska oil production is not so much increasing as it is stabilizing. 

Sen. Pete Kelly and Sen. Peter Micciche are claiming we almost have a balanced budget , our worries are over and that talk of taxes from the Democrats in the state House belongs in the "garbage can." This is either Voodoo Economics or the Peter Principle.

Even if we start using about $2 billion of Permanent Fund earnings a year to help pay for government services—a reasonable idea—the state will run a deficit that could approach or exceed $1 billion a year.

There are unpaid expenses and needs piling up across the state that are not in the official calculations, hidden costs that make a higher deficit more probable. State and local governments are neglecting maintenance and infrastructure improvements.

It would take a $300 million increase in the next fiscal year just to keep state services at the level they are today.

The senators hint that they have secret plans to cut the budget and fix everything. Spoiler alert: The secret plan is to keep spending savings for as long as it lasts.

The real story is that the GOP senators decided long ago that they won't support taxes. That's where their thinking began and where it ended. It doesn't matter that the proposed taxes would be among the lowest in the United States.

 "The only thing standing between you and an income tax is the Senate," was the mantra adopted last year by Sen. Pete Kelly. Then, as now, the only thing standing between Alaska and a fiscal plan is the Senate.

This is not about economics or facts. It's an ideological box the senators have created for themselves. Some of them believe—though they will not say it out loud—that as long as the state is paying any Permanent Fund Dividends, they will never support a statewide tax.

The reality of Alaska's situation is that without a statewide tax, an increase in oil taxes and other new revenues, additional dividend decreases are coming, but that's not all.

The Senate no-tax approach means that the Permanent Fund will likely decline in value over the long term, the Constitutional Budget Reserve will face extinction, state and local facilities will continue to fall apart, the University of Alaska and K-12 schools will lose more ground and public services of all kinds will be worse. None of that is in the interest of Alaskans. The combination is a bad one for the economy and private business.

Kelly says senators should be proud of themselves because of their vow to reject taxes, regardless of the cost to Alaska. He's wrong.


Dermot Cole3 Comments