Alaska Editorial: Recognition increasing that state needs new funds to sustain services

  • Thursday, February 23, 2017 9:26am
  • Opinion

This editorial first appeared in the Fairbanks Daily News-Miner:

After two years of kicking the can down the road, this may be the year the Legislature finally gets serious about closing the budget gap. For two years, action in the Alaska House and Senate has focused primarily on cuts, which has reduced the yearly deficit from $4 billion to $3 billion but can go little further without substantial negative impact to the state’s core services — items such as education, transportation and public safety. Finally, there appears to be an emerging recognition by legislators that new revenue for the state is an absolute necessity to return to balanced budgets. But just making that acknowledgment is only half the distance to a solution — the other, more important half is putting those revenue measures into place.

The Legislature has avoided serious discussion of new revenue for too long. By choosing to focus almost exclusively on cuts in for the past two years, legislators have done far less to bridge the fiscal gap than they might have. As a result, they have spent billions of dollars from the state’s fast-diminishing savings, leaving little room for error or unforeseen circumstances in this or future years.

Fortunately, the reality that this course of inaction cannot continue is beginning to sink in. A solid majority of respondents to the Senate majority caucus’ online budget survey early in the session supported revenue action. Since then, several bills have been introduced that would tap a portion of the Alaska Permanent Fund’s annual earnings to guarantee a dividend check and provide a stable revenue stream to help pay for state services. Both elements are crucial to stable budgeting for the state. Without leveraging the earnings of the state’s constitutionally protected fund, there will be no realistic way to bridge the revenue gap with measures such as cuts and individual taxes in a way that doesn’t cause widespread hardship for Alaskans. And without protecting the dividend, the spending habits of the Legislature will likely drain the permanent fund earnings reserve account by 2022, leaving no way to pay the annual checks Alaskans have come to expect (and, in some cases, depend on).

A few bills already have been introduced that would go far to address the revenue shortfall, chief among them House Bill 115, introduced by Reps. Neal Foster and Paul Seaton. A combination of a permanent funds earnings restructure and state income tax, the bill would increase state revenue enough to cover the vast majority of the budget gap, leaving the remainder to be addressed through cuts, other minor revenue measures and/or restructuring of oil tax credits.

There are other plans, such as that proposed by Gov. Bill Walker last year, that would use slightly different mechanisms but achieve the same basic end. What matters less than any particular plan is that the matter of revenues is dealt with in a substantive way this year.

The meaningful discussion about new revenue in Juneau is heartening. But it’s still a long way from a solution. Alaskans should stay engaged with developments on budget and revenue measures. Most importantly, they should ensure their representatives in Juneau are aware that anything short of a full-fledged revenue plan to balance the state budget this year is not acceptable for Alaska’s future. This is the Legislature’s third chance to chart a course to a balanced state budget — three strikes and you’re out.

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