You probably don't know the Permanent Fund bill you've read about has stealth provisions requiring continued (like continuing forever into the future) cuts to schools, roads, help for children and seniors, public safety and construction jobs. They've received little coverage.
Well, full disclosure is important. These provisions, added by some (not all) Republican Senate members, push me far over the edge on supporting a vastly imbalanced Permanent Fund-only plan — one that already wrongly tells our biggest corporations they don't have to chip in for a fiscal plan, but tells low-wage earners and seniors they have to carry the biggest part of the burden.
I get that we need a fiscal plan with a $3.5 billion deficit, and believe in principled compromise. I believe a revenue plan should be fair to all. At this point I'm being asked to support a bill with provisions that require continued, "every-year-into-the-future" pressure to cut public education, cut help and dignity for seniors, cut opportunity for children, cut public safety, cut our already damaged university and continually cut our ability to build and maintain the roads and infrastructure needed to grow our economy. That's not a responsible plan.
Let's leave aside the debate on whether a $1,000 annual dividend cut is a bad or good idea. It's a lot worse when the biggest oil companies in the state get to keep hundreds of millions of dollars in state "tax credit" subsidies, pay very little of their revenue to us in production taxes when they're profitable, and want everyone else to pay so they can get corporate welfare. Or when over 6,000 Alaska corporations keep their exemption from paying any Alaska corporate taxes at all, no matter how profitable they are.
Here are the gory details on two surprising provisions you likely haven't heard about in this bill.
These provisions effectively require combined oil revenue, and the Permanent Fund revenue in this bill, to constantly fall, in real, inflation-adjusted dollars every year into the future. In 10 years we'll have 25 percent less of these two pots of revenue, in inflation-adjusted dollars, to fund core services like roads, public safety and schools. In 20 years that will grow to roughly 50-60 percent less revenue from these two largest sources of funds. That's a future with less opportunity or dignity for children and seniors, a future of disappearing construction and infrastructure jobs and a future of less public safety.
Here's a bit on these radical provisions. Skip the next two paragraphs if you don't want the details.
The bill requires stagnant, flat combined Permanent Fund and oil revenue forever into the future, even if oil prices and oil revenue rise. Usable revenue from these funds are required to lag behind inflation and the increasing cost of goods and services that come with the reality of inflation. This revenue — the bulk of what will fund our budget — will shrink every year in real dollars.
How does that happen? The bill says that when Alaska starts making significant oil revenue at about $75 per barrel oil prices and above, you don't get to use that revenue to avoid continuing cuts to schools, public safety and core services. At oil prices above roughly $75 per barrel, when more oil revenue starts coming into the state, every extra budget dollar that comes in from higher oil prices requires a reduction by $1 to the budget from this bill's Permanent Fund Earnings Reserve revenue. You're left with stagnant, flat revenue from these sources of revenue forever into the future.
A second provision, not written in very tight language, intends to forbid the use of increasing oil revenue at high prices above roughly $120 per barrel. There are cute ways to get around that provision, and if that happens, there will be constant sniping between legislators and in the press about whether politicians are violating the "spirit" of that provision.
A vastly imbalanced "revenue plan" that includes a formula for damaged schools and basic services is too radical for me. I'll work for principled compromise, but not to violate my core principles.
Rep. Les Gara, D-Anchorage, has served in the state House of Representatives since 2003 and is a member of the House Finance Committee.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com or click here to submit via any web browser.