Legislature preserves state services so far, rejecting Dunleavy's radical plan

The Senate and the House have rejected the radical elements of Gov. Mike Dunleay’s so-called Honest Budget—showing bipartisan support for education and other public services—but a consensus has yet to form on how to pay the bills and the threat of vetoes remains.

The size of the Permanent Fund Dividend is a major sticking point. The Senate proposal for a dividend of $3,000 per person leaves a giant deficit, while the House proposal for a $1,200 dividend doesn’t. A compromise that no one likes is in order.

This combination of circumstances should be enough to get every elected official talking about taxes, which is a topic that most people in public office are reluctant to address, regardless of the financial realities.

That includes Dunleavy, who was a leader in the Senate during the years in which it spent billions in reserves, while promising that taxes were not needed and oil would save us yet again.

The state’s newspapers and leaders of civic organizations and other institutions can help by reminding people that even with new taxes we would still have the lowest taxes in the country, or close to it.

A few basic steps could solve most of the problem and stabilize Alaska finances—raise oil taxes by reducing the per-barrel credit, enact a state income tax and/or a state sales tax, and cap the Permanent Fund Dividend.

Objections aplenty would be made about all of these, but there is no solution with the potential to make everyone happy. And there is no potential solution that focuses exclusively on cutting the dividend or raising oil taxes or eliminating state services.

Taxes are unpopular and always will be, but they are the price of a modern society. We need state and local governments that function well enough to attract investment and encourage families to stick around, providing the foundation for healthy communities and a sound economy. Enacting taxes and capping the dividend makes sense as part of a compromise plan that helps pay for vital public services.

Some public officials won’t talk about taxes as long as the state is paying any size of Permanent Fund Dividend. Others stick to talking points to oppose all taxes all the time, never bothering with the complicated balancing act required of a good public official.

In the coming days a conference committee will work out the differences between the House and Senate versions of the operating budget. Then the budget will go to the governor, who may follow through on his veto threats.

It takes a three-quarter vote of the Legislature to override budget vetoes, which is a difficult margin to achieve.

The state education budget is probably safe for the next fiscal year because it was funded in advance and Attorney General Kevin Clarkson has made a weak claim—disputed by legislative attorneys—that it was unconstitutional.

The Medicaid budget is harder to cut than Dunleavy figured and there is no coherent plan yet to implement the massive reductions he proposed, so the veto threat there may be limited. The ferry system is already facing a major cut from the Senate version of the budget, one that would curtail winter services and harm coastal communities.

That leaves the University of Alaska as the most vulnerable major institution for Dunleavy’s ill-advised vetoes. He and his staff have offered false and misleading justifications for university budget cuts, which have been soundly rejected by a majority of the Legislature. But logic hasn’t been a big factor in the Dunleavy budget and it may not play into a veto decision.

The damage that Dunelavy has done with his attack on the university is impossible to calculate. Promising faculty members have to be looking for other opportunities Outside, while parents who pay attention are probably encouraging high school seniors to do the same.

There is a lot of babbling about a budget crisis in Alaska. We have a crisis, but it’s one created by a lack of leadership in the governor’s office, not by a lack of solutions.