June 6, 2017
Dear Alaskans,

For years, Republicans in the legislature have stonewalled all efforts to create a stable, durable fiscal plan.  This must stop.  We cannot accept a plan simply because it averts a government shut down this year, while all but guaranteeing one next year. The can has been kicked far enough and it’s time for a long-term solution.

Like all of us, the Governor is distressed by the looming possibility of a government shut down and the damage it would inflict on Alaskans.  He hoped to put together a proposal that would appeal to all sides, but the end product fell far short of the mark. His proposal is weak, and inadequate, and will put us right back in the same spot next year. It is inexplicable.

Alaska voters made a dramatic statement, electing a new majority to the House of Representatives who came together to specifically put us on a path to fiscal stability. They were tired of the old ways, the old giveaways to special interests, the kicking the can down the road, the reckless ideology that supports industry over Alaskans and oil over education. This new House is the peoples’ House, made up of Republicans, Democrats, and Independents who put on their big pants and decided to work together to get something done, and right our fiscal ship. It’s time to listen.

With that said, the Governor’s proposal includes some pieces of a durable fiscal plan, but comes down on the wrong side in the details – and details can make or break a plan:

  • Oil & Gas:  The Governor’s proposal retains the most harmful aspects of HB111 without offering a real fix.  It sounds good now, but this proposal actually puts us in a far worse financial dilemma in the future. The “fix” is no fix.  Further, it allows the Senate Majority to gives an extra $288 Million in tax credits above our required amount emptying our statutory savings, instead of fully funding education.
  • Use of the Permanent Fund Earnings:  The Governor proposes using the Senate’s version of SB-26.  That means a lower PFD ($1,000 instead of the $1,250 in the House version), a high draw against our savings accounts, and less money available to inflation-proof the fund. 
  • The dividend is not protected:  Not only does the Senate version of SB-26 proposed by the Governor cut the dividend down to $1,000, it give the legislature the power to determine IF Alaskans even receive one at all.  The Senate plan uses only the Permanent Fund as a revenue source. They decry a tax on “working Alaskans” while picking the pockets of EVERY Alaskan including children’s college funds, and the elderly’s safety net. They plan to use your Permanent Fund money and run a deficit for the better part of a decade. We need a balanced/fair plan to protect your dividend from this kind of reckless fiscal policy.

    The dividend connects all Alaskans to the Permanent Fund and is essential to ensuring its long term survival.  It belongs to all of us and must be protected. The only way to do this is through a Constitutional amendment decided by the people, and yet that option is not even on the table.
  • New Revenue:  The crux of a stable fiscal plan is to diversify the State’s sources of revenue.  This proposal starts down that path, but never arrives. The “Head Tax” proposed must be adjusted to truly be a fair and equitable broad-based tax. One of the purposes of the proposed income tax was to balance out the disproportionate impact on average Alaskan families from the Senate Majority’s PFD cuts. An income tax would mean wealthy Alaskans and non-resident workers would share this burden. Most importantly, it closes the budget gap. The “Head Tax” accomplishes the goal of ensuring out-of-state workers pay something, but it doesn’t go nearly far enough and lays more burden on lower and middle income Alaskans.  

The bottom line is the Senate Majority doesn’t address new revenue at all – it simply uses the Permanent Fund’s Earnings Reserve Account to fund government for another year, and reduces your dividend to do it.  The Governor’s proposal uses the House’s operating budget which restores K-12 education cuts and university funding.  Again, it sounds great, but without addressing revenue, that full funding will be on the chopping block again next year, and the year after, until we face reality. 

After careful review of the Governor’s proposed compromise, it is clear that if Alaska is to find a sound financial footing, the answer must come from the legislature and not the Governor. The House Majority laid out the blue-print for a resilient Alaska. Unfortunately, the Senate Majority and the Governor are not on a path that get us to that ultimate goal. 

Sincerely,

Senate Democratic Leader