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Governor should give up Alaska gas line, give us real budget solution

  • Author: John Havelock
    | Opinion
  • Updated: October 10, 2016
  • Published October 10, 2016

Alaska Gov. Bill Walker announces that he is using his veto power to cap the Alaska Permanent Fund dividend at $1,000 this year, during a press conference at the Atwood Building in Anchorage on  June 29, 2016. (Loren Holmes / Alaska Dispatch News)

It's long past time for Gov. Bill Walker to concentrate on the critical business at hand: resetting the Alaska economy. Shelve pipe dreams. Anybody paying attention can see, as a panel of expert critics noted at the recent Commonwealth North presentation, that the pipeline proposal relies upon long-term fantasies, impracticalities and unacceptable risks. Zero out the gas line, and please — not another Far East trip! Give a final dump to other capital projects on which the administration is still wasting time and money, e.g. Knik Bridge and Juneau road.  Sorry Win Gruening (commentary, Oct. 5), a road to nowhere matches a bridge to nowhere.

Fixing the Alaska economy is politically tough but not complicated. Yes, bitter pills must be swallowed and a clear path set out. Alaskans are waiting for leadership: a much more vigorous advocacy plus clarity of purpose and direction. Walker and his administration must take their case, against a fainthearted Legislature and vested interests, to the people.

Alaskans need to know before the November election who's ready to get real. No quiet toleration of nonsense please, like solving the problem with budget cuts or, this week, an unproven oil discovery that looks more like a timely political cue to preserving billions in oil tax refunds. Dropping an obsession with the gas line (and thus need for oil industry political support) will enable Walker to get in the industry's face about oil taxes, an issue which has been ducked since his inauguration.

The drop in the state's share of the value of oil from 35 percent to 8 percent between 2012 and 2015, as reported at the Common Ground seminar and Robin Brena's Alaska Dispatch News commentary (Oct. 2), is profoundly unacceptable. Brena's math and estimate of an additional $3 billion in state revenue may be unduly optimistic but appropriate revisions and audits should add well over $1 billion. One-third corporate profits, one-third federal take and one-third state take has been the gold-standard state minimum since the 1970s.

Apparently, some of the Joe Miller folk want to recall Walker based on his broken election promise to leave the dividend alone. They have a point, but fixing the Permanent Fund and the dividend are a clear part of the solution.

The fix is to split the income of the Permanent Fund 50-50 between the people's dividend (PFD) and the Legislature. Allow some level of inflation proofing and use a five-year average of earnings for measuring distribution. Assuming a conservative net return on investment, somewhere over a billion each in income goes to fund the deficit and the PFD. Or set the dividend at $1,500 plus inflation, a worthy compromise between today's $2,000 and recent PFD distributions.

But those who dare look at the issue know there is still a well over $1 billion budget gap. Observation in Anchorage and as reported more generally by Dermot Cole, confirm that most Alaskans recognize that Alaska is overdue for major tax policy corrections.

Look first at the income tax in relation to the PFD. We have all heard people with comfortable incomes describe the PFD as a "giveaway."  It can be to them, but it's not to the lower income half of the population, most of whom earn too little to pay income taxes. Walker's cut this year will come down extra hard on tens of thousands of subsistence villagers and will jolt the economy that benefits from the pass through of this distribution.

The PFD, beyond justification as a claim to common ownership, is both a minimum income guarantee and children's allowance, programs commonplace in other economically advanced countries. So fix the minimum rate of the income tax as a fraction of the federal at a level that allows the top 53 percent to pay the tax with some or all of their PFD. The rate will result in the most comfortable appropriately paying much more than that. Taxing back the PFD rather than cutting it offers also a federal tax deduction.

Other taxes, restoring us, at a minimum, to U.S. normalcy, include taxes on gasoline and luxury items. The most obvious under-payer of taxes is alcohol, considering the huge gap between what we now collect and the costs to the state and society from abuse.

A summer sales tax will pull in income from the tourist industry. Other conventional taxes can be restored or boosted to address the gap.

When a plan is explained, wait until its core is enacted before cutting the state budget by whatever it takes. When cutting budgets, don't forget the Legislature and Governor's Office, (please, no more contracts to former law partners.)

Walker has the information. He must start now, as he should have much earlier, without gas line distractions, in defining and selling a balanced budget that does not start with concessions to the oil industry.  Keep it simple and make sure the public knows which legislators are playing fantasy budgeting.

John Havelock, retired UAA professor of Justice, was Alaska's attorney general in the early 1970s and worked with commissioners Eric Wohlforth and Joe Henri for Gov. Bill Egan in setting oil taxes, preparing the governor's budget and educating the public.

The views expressed here are the writer's 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.

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