It comes down to this: We can’t continue living in fiscal chaos. We simply need to get something done and we have to compromise to get there. People need to know that they will get a Permanent Fund dividend they can depend on. And, we need to know that we have revenue we can depend on. In my time in the Legislature, I’ve learned that bringing together ideas from all sides works. This attitude has served me well. During my service, I have passed 20 different measures by working with colleagues from all ends of Alaska’s political spectrum.
So, now, please consider the fiscal plan detailed below. This plan would deliver PFDs that people can depend on and creates new revenue needed for our essential services. These aren’t all my ideas or my first choices. These are ideas that have come from colleagues. But it’s realistic and recognizes that to crawl out of this hole of fiscal chaos, anything we do has to be passed by both the evenly divided House and Republican-led Senate.
This fiscal plan has seven parts. I start with the question – do you want only Alaskans to pay for everything? Or should the 20% of out-of-state workers or the 2.26 million visitors (2019 numbers) contribute to services they use? If you say yes, then we need new revenue and we can afford a bigger dividend for Alaskans. Before you say no, please read to the end.
1. A constitutional amendment that combines the two accounts of the Permanent Fund, permanently protects the Permanent Fund from overspending by limiting the annual draw to no more than 5%, and guarantees a dividend as provided by statute.
2. A new formula for the Permanent Fund earnings draw to be 50% for dividends and 50% for state services. This was recommended by the bicameral, bipartisan Fiscal Policy Working Group with an additional $500 million-$700 million in revenue.
3. A 2% statewide sales and use tax that exempts food, medicine and heating oil. This can generate $300 million per year. This diversifies our revenue and tourists would contribute to services.
4. A two-year change to the oil tax to make it function like a gross tax for two years while a comprehensive rewrite can be considered, bringing in $150 million in new revenue each year.
5. Addressing a loophole in the corporate income tax that generates about $30 million. It would create a level playing field for all oil and gas companies doing business in Alaska.
6. Adjust the fuel tax, which is really more of a user fee, that hasn’t been adjusted in more than 40 years and can generate about $30 million.
7. Budget reductions. Our budget represents an Alaska with the highest rates of child abuse, domestic violence, sexual assault, substance misuse and untreated mental health conditions. The status quo is unacceptable. These public health and public safety crises are very costly, so we have both a financial and moral imperative to address these issues.
These seven items include $500 million in new revenue and a pathway for achieving budget reductions.
This fiscal plan does not rely on an oil tax change as the foundation, because being overly reliant on oil tax revenue got us into this mess. Linking revenue for essential state services to a commodity traded in a world market we have no control over has made it difficult to plan (in the past 18 months, the price of oil has been everywhere between $0 and $81), price volatility means changes to the net profits oil tax may bring in little to no additional revenue, and continuing to rely on oil tax revenue does not diversify our revenue.
In terms of impacts to Alaskans, compare the current situation: an $1,114 dividend cobbled together from questionable fund sources, to the 50/50 plan, which would give Alaskans a $2,350 dividend.
Let’s look at a hypothetical family of four under this fiscal plan. If they spend $20,000 per year on taxable items, they have a sales tax burden of $400, and let’s estimate a fuel tax burden of $75 per adult. Each would also receive a $2,350 dividend, where children are not taxed. Therefore, if they subtract their tax burden of $550, their family would have received $8,850. This year, a family of four will receive $4,400, or $4,450 less.
Research done by Rasmuson Foundation and others told us that cutting the dividend is the most regressive option, far more regressive than a sales tax. The fact is that many Alaskans are struggling. They don’t struggle because they aren’t working hard. They struggle because wages haven’t kept up with inflation, the high cost of living in Alaska, and because kids are expensive.
I will not stand by and run the state to edge of the cliff over and over where we regularly send thousands of state employees layoff notices, pink slips to educators, leave fishing crews and farmers wondering if their seasons will be cancelled, and many more very real consequences of our dysfunctional state government.
Working together, my colleagues and I have successfully negotiated the end of the cash credit program for oil companies. I also put together the package that requires health care providers to tell you what your care will cost, to fund marital and family therapy for families in need, and to do prevention work. All of these were accomplished by working with my Republican colleagues. It is possible to work together.
I have some colleagues saying they won’t do anything until Gov. Mike Dunleavy does. I don’t need his permission to lead. Others say wait until after the next election. I am a legislator who considers it an obligation of my public service to get things done for Alaskans. When I ask Alaskans, they agree.
I have to keep trying.
Rep. Geran Tarr, D-Anchorage, represents East Anchorage neighborhoods in the Alaska House of Representatives.
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