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Legislators would crash state finances on principle, at everyone's expense

We're facing the likelihood that the Alaska Legislature won't make meaningful progress this year in solving the fiscal crisis that threatens our state.

The budget deal that passed this week set up the Legislature to leave Juneau at any time with everyone's checks being paid. But budget cuts are insignificant in the face of Alaska's loss of revenue. No major changes have been made to solve the problem.

The package of measures proposed last year by Gov. Bill Walker never received a vote.

At points in the session, legislators said the fear of doing nothing would be sufficient to motivate tough decisions. But now summer is here, Alaskans are fishing, the filing deadline for legislative elections has passed, and delaying another year while spending billions more in savings seems to have become an acceptable outcome.

It's not acceptable. To put the magnitude of this decision in perspective, the savings that would be spent this coming year would, if retained as savings, perpetually generate enough interest to spin off about $200 million annually. That's as much as the income tax the Legislature hasn't had the stomach to vote on.

The savings spent since the budget deficits started, added to this coming year's deficit, could have provided annual investment income of more than $600 million. That's $850 for every Alaskan, every year, forever.

Draining savings also means that a solution would be much harder next year. We need that money to transition to a sustainable finance system.

But even before the state crashes with emptied savings accounts, we will feel the pain in the economy. Ron Duncan, CEO of telecommunications company GCI, who has mobilized business and labor leaders to ask for a solution, expects inaction to more than double the severity of the coming recession and reduce our population by 100,000. Businesses and families are already pulling back.

This is a lot for us to pay so legislators can stand on principle and refuse to compromise. But when I spoke to legislators, I found them using the past tense.

"We're going to have to change the makeup of the Legislature if you are going to address the state's fiscal future," said Rep. Chris Tuck, D-Anchorage, the House minority leader. "I hate to be gloom and doom but that's the way it is."

Sen. Anna MacKinnon, R-Eagle River, the Senate Finance co-chair, said the Senate is preparing to vote on bills that would address a significant chunk of the problem, but she doesn't expect them to pass.

"The governor to this day has not been successful in getting 11 senators to support his proposals," MacKinnon said.

To her credit, MacKinnon has sought compromise and is still trying. The Permanent Fund bill she fashioned out of various other proposals would buy the Legislature time and change policies that simply don't make sense anymore.

But the middle isn't large enough. Too many legislators on the right and left hold their own positions too tightly.

The Legislature has passed some major, difficult and politically risky bills this year, including criminal justice and Medicaid reform. Members have real concerns about Walker's package and many feel they are fighting for their constituents and their principles.

What they seem to have lost sight of, however, is how their individual concerns compare to the magnitude of their responsibility to Alaska as a whole.

The debate on oil tax credits is key. Senators are willing to phase out credits in Cook Inlet but want to protect them on the North Slope. A coalition of Democrats and moderate Republicans in the House wants to increase the state's take in both places.

The issue is extraordinarily complex and people of good will disagree. What seems indisputable, however, is that this argument is not worth crashing the state over.

"It's like, 'If I can't paint that room blue, I'm going to burn the house down,'" Duncan said. "That's literally where we are."

Tuck said the House minority needs bills to go through in order, with a restructuring of the Permanent Fund last. That way, legislators won't give up half of poor people's dividends just to have the state send the money to the oil industry for tax credits.

Tuck's group made a tactical move to negotiate for more money for public education and the University of Alaska in the budget deal, but not to hold out for a total fiscal package, as Walker wanted. The House minority's leverage came from its ability to block access to savings in the Constitutional Budget Reserve, but Tuck felt that holding that card too long could mean losing it.

Politically, giving up the CBR vote lets Democrats sit back and say the problem belongs to the Republicans. After all, the Republicans have large majorities in the House and Senate. They could pass anything they want without any Democratic votes.

But hard-liners in the Republican Party have pandered to ignorance. You still hear people saying that they won't pay taxes or give up a dollar of dividends unless some pet issue is addressed or more cuts are made that have no relevance to the size of the problem.

My ideal solution would be closer to the Democrats'. A dividend cut is a head tax that hurts the poor. But an economic calamity hurts the poor too, and besides, no fiscal solution is possible with the current formula for dividends and inflation-proofing left in place.

In life, not only in politics, we sometimes have to deal with mean, ignorant or irrational people. Demanding fairness in those dealings doesn't solve anything. You often have to give more than you think you should.

If I were in the Legislature, I would vote to take the pieces of a solution I could get. A partial solution, even if unfair and poorly structured, could at least be fixed in the future.

No solution at all means we will run out of money and everyone loses.

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 or click here to submit via any web browser.

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