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A dividend Alaska can afford

  • Author: Chris Birch
    | Opinion
  • Updated: May 3
  • Published May 3

The Senate Chamber at the Alaska State Capitol on Tuesday, December 2, 2014. (Loren Holmes / ADN)

During Wednesday’s Senate floor debate on the state budget, I offered an amendment to reduce this year’s Permanent Fund dividend from the proposed $3,000 to a more reasonable $1,200 per Alaskan. My reasoning was simple and practical: A $1,200 PFD is one Alaska can afford.

It’s a matter of simple math. A $3,000 dividend leaves a gaping $1.2 billion deficit, while a $1,200 dividend would balance the budget and allow funding of core state services at sensibly reduced levels — all while providing a reasonably sized dividend more in line with the PFDs Alaskans have received over the decades.

A $1,200 dividend also keeps a promise the Legislature made to Alaskans just last year.

With the passage of Senate Bill 26, we restructured the way Permanent Fund earnings are fundamentally managed and placed into law a fixed annual transfer of roughly 5 percent from the fund to the state treasury. The goal was simple: protect the $65 billion Permanent Fund itself while creating a sustainable, long-term revenue stream — one that allows for a healthy PFD and helps pay for core state services like education, public safety and infrastructure.

But by putting the state on course for a $1.2 billion deficit, a $3,000 dividend is anything but healthy.

We have three basic options to close the budget gap created by a $3,000 dividend:

1. Cut another $1.2 billion from the budget. While I strongly support continued downward pressure on the budget, we need to continue making sensible, managed, multi-year reductions so we don’t send the state’s economy into a tailspin or cut core services too deeply.

2. Raise $1.2 billion in new revenue, which means either doubling oil and gas taxes or levying a hefty new income and/or sales tax on Alaskans. But to me it doesn’t make sense to torpedo the oil and gas industry with a massive tax increase or to tax Alaskans heavily with one hand just to send out a big dividend with the other.

3. Pull $1.2 billion from our dwindling cash reserves, which means either wiping out most of what remains of the state savings account or drawing from the Permanent Fund earnings reserve, a move that will reduce future dividends and our ability to fund core services down the road.

Option No. 3 — a $1.2 billion draw from the earnings reserve — appears to be the course plotted by the budget recently sent to the House for concurrence. This move prioritizes a super-sized PFD this year over safeguarding a reasonable dividend for future generations and providing funding for schools, law enforcement, roads and other essential state services for years to come.

The good news is that the budget is not yet finalized. The differences between the House and Senate versions of the budget — including the size of the PFD — will now get worked out in a conference committee. My hope is that a budget that considers the long game will prevail and a balance will be found between reasonable budget cuts, preserving state savings accounts and paying a dividend Alaska can afford.

Sen. Chris Birch represents Senate District M, South Anchorage/Lower Hillside.

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