Until budget is wrung out, Alaskans won't buy dividend cuts

Here we go again. This time, our saviors are calling themselves the Permanent Fund Defenders. They are using words such as "raid" and "people's money" and government "theft," just like always.

Their target? Gov. Bill Walker's plan to use the fund's economic muscle to help close the state's yawning $3 billion budget gap.

The Defenders demand a public vote before using the fund, or reducing dividends, to pay for government despite 75,588 people trooping to the polls on Nov. 2, 1976, to amend the state constitution and establish the Permanent Fund. They mandated, "The income from the fund would be deposited in the State's General Fund and be available for appropriation for the State unless law provided otherwise."

Nothing about a public vote; nothing about a dividend, which was a lousy idea from Day One, becoming, as it has, the tail wagging the dog. (And yes, I cash mine.)

"I think it should go to a vote of the people because it's ours and they're trying to take it away from us," Dr. Jack Hickel, son of late Gov. Walter Hickel and a political activist, told KTVA.

In the past, groups such as this, with names like "Save Your Dividend," have popped up in a state of high dudgeon whenever somebody dares suggest using the now-$55 billion fund for its intended and constitutionally embedded purpose — helping to pay for state government. This one has a dozen members, including former Sens. Clem Tillion and Rick Halford.

[Judge tosses lawsuit challenging governor's PFD cut]

You might surmise from the caterwauling that Walker wants to loot the fund. Hardly. He has said his plan this year essentially is the same as last year's Senate Bill 128, the legislatively rejiggered centerpiece of his deficit-reduction package. It passed the Senate but died in the House Finance Committee.

Walker's plan would create a formula for a sustainable draw from the Permanent Fund's Earnings Reserve Account — a Percent of Market Value approach, of sorts. The formula would make available for dividends 20 percent of the 75 percent of the revenue from the state's resource income now funneled into the general fund, along with 20 percent of whatever amount is withdrawn from the Permanent Fund.

The withdrawal from the Permanent Fund to pay for government services is projected to be 5.25 percent, based on a five-year average of the fund's value. In 2017, that means about $2.4 billion would be moved to the general fund. After paying dividends from that, about $1.8 billion would be available for deficit reduction. The plan's latest iteration pays dividends for two years at $1,000 annually. In subsequent years, that amount would float.

The elephant in the room is the size of government. When Walker proposed his $4.2 billion unrestricted general fund operating budget it drew fire from both legislative chambers. Government remains much too large in the view of many Alaskans, legislators included, and they demand cuts. The governor's budget, after all, shaves only $123 million in spending – a paltry $123 million – from agency operations.

Yes, there have been cuts — many of them through attrition — and, yes, we clearly cannot cut our way out of this mess, but more must be trimmed before reaching into Alaskans' pockets if Walker wants his plan to get traction. He could, for example, start with Alaska's billion-dollar Health and Social Services budget and its Cadillac-class Medicaid expansion, or maybe the state's $1.2 billion education budget. Somewhere in all those thousands of millions, there must be a dollar or two that could be cut, trimmed or eliminated.

[State senator takes case against PFD cut to Alaska Supreme Court]

Government's almost palpable reluctance to cut leaves too many Alaskans suspecting it is fighting to preserve perks, union jobs and programs — all at their expense. It gives groups such as the Defenders a raison d'etre. Walker's bolt-from-the-blue veto of more than $600 million earmarked for this year's dividends only adds to that perception.

As if to bolster that view, the Alaska Supreme Court decided it could not be bothered to expedite a lawsuit challenging Walker's veto authority although the case affects almost every Alaskan. Is it any wonder groups such as the Permanent Fund Defenders find fertile ground to till?

Make no mistake, the fund will be used, likely sooner rather than later, but there must be a combination of more, and meaningful, cuts to sell the governor's plan. So far, Walker and Co. have not made their case and throwing tens of millions of dollars at projects such as a gas line nobody believes will be built — while cutting troopers — hurts.

Without the cuts, without convincing Alaskans every penny has been wrung from the budget, outfits such as the Permanent Fund Defenders will bring more heat than light to the party, making it even tougher for lawmakers and Walker to do what needs to be done.

The clock is ticking.

Paul Jenkins is editor of the AnchorageDailyPlanet.com, a division of Porcaro Communications.

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.