The old political adage “never let a crisis go to waste” is apparently guiding Gov. Mike Dunleavy in his latest attempt to super-size the Permanent Fund dividend in the name of pandemic relief. Giving things away is a time-tested political tactic, but we need to look beyond the next election cycle and avoid making mistakes today that our children and grandchildren will be forced to pay for tomorrow.
Three years ago, Gov. Dunleavy campaigned on giving every Alaskan a $3,000 dividend check. Now, with the pandemic as a backdrop, he wants to give every Alaskan a jumbo $5,000 dividend check under the auspices of “the need for economic relief.”
Make no mistake, this past year has been tough on Alaskans. In addition to the pandemic’s impacts on Alaskans’ physical and mental health, people have lost their jobs, leaving them unable to pay for rent and bills. In stark contrast, the stock market has been healthy, and our Permanent Fund Earnings Reserve Account has grown. It’s easy to see why Gov. Dunleavy would propose a $5,000 dividend as a quick fix.
The federal government recognized the economic hardship caused by the pandemic and gave billions of dollars to every state to help families and businesses in need. Alaska received more than $5.8 billion in federal funds, which came in the form of cash deposits into Alaskans’ bank accounts, rent assistance, utility grants, childcare waivers, added food benefits and enhanced unemployment payments.
That being said, money is tight here in Alaska. We’ve burned through our savings. The state’s budget for next fiscal year, without a dividend, nearly balances. The bigger the dividend, the bigger the deficit. Gov. Dunleavy’s proposal renders a $2 billion deficit and offers no plan on how to pay for it except to mention “other revenue sources.” That is political code for “taxes of every kind.” It would take both a hefty income tax and statewide sales tax from our small population to close a gap that large. This amount of taxation would have far more devastating effects in the long term than any amount of dividend received. But Gov. Dunleavy isn’t telling you that.
So, why not take $6.3 billion from the Permanent Fund Earnings Reserve Account in one fell swoop? If we do that, the math shows that Alaskans can say goodbye to dividends forever within a few years. But Gov. Dunleavy isn’t telling you that, either.
Alaskans, we need a plan that works.
First, we must change the calculation of the dividend payout to something affordable for many years to come. It makes sense to pay a dividend using 100% of the oil royalties deposited into the Permanent Fund each year. This is something the state can afford over time and is truly the fair share calculation.
Second, we need to pass an effective spending cap that includes the dividend. It’s time to recognize that all spending, whether for schools, roads or dividend checks, is still spending. This will force the Legislature to continue downward pressure on the operating budget now and into the future.
Third, we must stimulate the economy the right way. While politically appealing, giving every Alaskan a $5,000 check, regardless of their economic circumstance, is a misguided and flawed policy. Instead, we should focus on getting Alaskans back to work. Let’s identify strategic investments to grow our economy, like alternative energy projects, modernizing ports, expanding broadband across Alaska, and building roads to connect communities. There are also deferred maintenance projects like leaky buildings, sagging bridges, and rutted roads that demand attention. This would create thousands of year-round jobs that pay competitive wages. Under this plan, we will create confidence in our state and attract additional federal and private investment dollars to invest in Alaska.
Alaska needs a blueprint for true economic success and prosperity, not a one-off PFD bonus that stunts our future and robs the next generation. I believe this plan will inspire confidence that Alaska is a good place to raise a family, for businesses to invest for the long term, and to ultimately create a strong and thriving economy.
Sen. Natasha von Imhof represents Alaska Senate District L, chairs the Legislative Budget & Audit Committee, and serves on the Senate Finance Committee and Senate Resources Committee.
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