OPINION: Finally fixing Alaska’s longstanding fiscal problems

After years of dead-end debates and deficit spending, there are hopeful signs that both the Legislature and Dunleavy administration are serious about finally fixing Alaska’s longstanding fiscal problems — that is, balancing revenues and expenditures to avoid a structural deficit.

Last summer, the Legislature formed a bipartisan and bicameral Fiscal Policy Working Group to delve into the state’s fiscal problems and try to develop practical solutions. A consensus-based, well-reasoned final report was released in August that presented a set of recommended actions that would comprehensively address the fiscal issues and problems. However, despite three special sessions in 2021, the Legislature took no actions to solve the problems.

But in the current legislative session, there has been progress in fixing the fiscal problems. The Senate Finance Committee has approved Senate Bill (SB) 199 for consideration by the Senate. SB 199 would set the percentage of the draw from the Permanent Fund earnings for state services and for PFDs. The draw would be 50/50 (split between state services and the dividend) in fiscal year 2023, then 75/25 until 2026. If in 2026, the state increases its revenues by $800 million to create a balanced budget, the draw would revert to 50/50; if not, it would remain 75/25. The House has passed a state operating budget for FY 2023 that contains a PFD at $1,250 with an additional $1,300 energy relief check for each eligible Alaskan — when added together, the payment would be essentially the same as the payment in SB 199 for FY 2023.

The House-passed budget would do some other prudent things with this year’s surplus revenue, created by the recent higher-than-expected oil prices, including forward-funding K-12 education for fiscal 2024, paying the remainder of oil and gas tax credits owed to producers, transferring more than $1 billion to the constitutionally protected part (the principal) of the Permanent Fund, and rebuilding state savings accounts to about $2.2 billion (after being depleted by a decade of deficit spending).

In addition to the Legislature’s progress toward a sound fiscal plan, the Dunleavy administration has expressed strong support for fixing Alaska’s longstanding fiscal problems. In a recent opinion piece in the Anchorage Daily News, Commissioner of Revenue Lucinda Mahoney stated: “We are presented with an opportunity to establish a fiscal plan. But policymakers must make a choice; we can spend our surpluses like policymakers of the past have — leaving us in an unstable fiscal situation when oil revenues dry up, or we can enact sound fiscal policies such as establishing an effective spending cap, replenishing savings, and establishing firm rules for spending the Permanent Fund distributions.”

Although there are significant differences of position on what a “sound fiscal plan” should contain, there is strong interest from all the primary players in getting to such a plan.

Now, before the Legislature adjourns on or before May 18, is a crucial time for Alaskans to let their representatives know we want a sound fiscal plan drafted and enacted, and that there have been way too many years of kicking the can down the road.

Chuck Gilbert is the treasurer of Alaska Common Ground, Inc., a nonprofit corporation that encourages engagement, discussion and cooperative resolution of Alaska’s issues. ACG has been addressing Alaska’s fiscal problems since its inception in 1992.

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