Suppose you were a deer staring blankly into the blazing headlights of an oncoming, speeding truck. And suppose you were a member of the Alaska Legislature. But, with a tip of the hat to Mark Twain, I repeat myself.
The state Department of Revenue guys analyzed Gov. Bill Walker's proposed payroll tax — read income tax or pay cut, your pick — and concluded it would cost the state $10 million and require the hiring of 40 new bureaucrats when fully implemented in 2020.
If adopted, and it ain’t likely with next year’s election looming, the 1.5 percent levy would take effect Jan. 1, 2019. It would have a maximum cap equal to two times the Permanent Fund dividend distributed in the previous calendar year. Good grief. It would affect every worker and those who are self-employed.
[Alaska is living like a retiree but investing like a 30-year-old]
If the levy ever gets up and running, it would pick working people's pockets to the tune of $320 million a year, far from the amount of dough needed to pull Alaska out of the red ink-filled pit it finds itself splashing around in because of sagging oil prices. State government is running a $2.8 billion deficit and blazing through its savings accounts with abandon to keep the lights on.
Rather than further cutting government, the Walker administration and Democrats in the Legislature are fighting like the third monkey on the gangway to Noah's Ark to avoid all the nastiness of cutting a too-large government to fit revenues. Their pie-in-the-sky tax is Exhibit A.
Rather than doing the obvious, our friends on the left would rather spawn a new bureaucracy, force private business to grapple with the costly rigmarole involved in tax collecting and accounting, and take in — eventually, maybe — $320 million a year to plug that $2.8 billion budget gap.
So, a good question is: If the income tax is going nowhere in the Legislature and nobody is volunteering to donate $2.8 billion annually to government, what are the viable options? There is one, a very good one.
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Rather than picking the pockets of working Alaskans for chump change that barely bruises the deficit, why not put into play the pot of money set aside 41 years ago to fund government when things get tough — the Permanent Fund's Earnings Reserve.
[Let's look at the value of Alaska's PFD]
There, I said it. And why not? At the end of June, the reserve's balance was a whopping $12.8 billion. The Permanent Fund deposited earnings amounting to $3.2 billion into the account in fiscal 2017. It put $2.2 billion in in fiscal 2016, and $2.9 billion in 2015. That is $2.8 billion on average each year.
Revenue officials predict the fund will generate $4.4 billion for deposit in the earnings reserve in 2018 — and the deficit is $2.8 billion. There is more than enough in the pot of money for government and dividends. What is lacking is the political will to make it happen.
Over the years, our all-too-timid lawmakers have been loathe to touch the reserve for its intended purpose because they feared confused voters would accuse them of "raiding" the fund itself, a transgression seen in many eyes as rising to the level of blasphemy and stealing chickens. Instead, they played defense, yammering about protecting the fund for future generations, blah-blah-blah. Almost all the spending from the reserve has been to cover sacrosanct Permanent Fund dividends, inflation-proof the fund, add to its principal, and cover operational costs.
Add to that: Over the decades, with the handwriting clearly on the wall, they failed to craft a credible fiscal plan.
There may not be all that many future generations working and living here if Alaska fails to snap its fiscal house into shape. Using the reserve — rather than clamping tax shackles on each and every working Alaskan — to help make ends meet makes good sense.
It would be incalculably better if there were a plan in place before the earnings reserve is pressed into use — perhaps something like a percent of market value that withdraws a set percentage of the fund each year to run government and pay dividends. Barring that, it is up to the Legislature and the governor. The likelihood of anything getting done soon appears remote with next year's elections looming and the enduring political squeamishness about anything having to do with the Permanent Fund.
When the Legislature, now in its fourth special session with no fiscal progress to show for months of effort, returns to Juneau in January, its back will be against the wall and the options will be few. Almost all of them will be less palatable than simply using the fund's earnings as voters in 1976 intended. The rest of us can only hope.
Suppose you were a deer. …
Paul Jenkins is editor of the Anchorage Daily Planet.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.