A PFD Cut is Not a Fiscal Plan
SB 107 cuts the PFD and sets Alaska on a pathway to decimate the PFD altogether. Its proponents had the audacity to claim the bill was a “fiscal plan” which I and my fellow Senate Minority members aptly refuted with solid logic and facts.
The bill eliminates the original PFD formula and replaces it with a 75/25 split – 75% of the annual draw from the Permanent Fund for government and 25% for the PFD.
The bait and switch of the conditional language in the bill to eventually arrive at a 50/50 split is unachievable and draws on a false dichotomy pitting taxes against the PFD. The bill fails to recognize the fact that taxes pay for government, not PFDs. There is no path forward to raise the $2.3 billion in taxes the bill requires ($1.3 billion for spending, $1 billion for savings) to trigger the 50/50 PFD.
Add to that, the Senate Majority has indicated it supports a spending level that will eliminate the PFD in approximately five years and require new taxes in years following.
SB 107 does not pass the common-sense test. It is not realistic that five years down the road the legislature will increase the PFD to a 50/50 split. History demonstrates that with more demands on spending, the priority will be government and not the PFD.
Because the bill contains no conditional language to require a spending cap, the high amount of taxes that will be required when the PFD runs out will be incredibly disruptive to our economy. The Senate Majority’s refusal to move forward on a comprehensive fiscal plan is jeopardizing Alaska future.
The Senate Minority considers a comprehensive fiscal plan as one that is in line with the bipartisan, bicameral Fiscal Policy Working Group’s recommendations. This includes at minimum: 1) an adjustment to the current constitutional spending cap, 2) constitutional protection of the PFD with no less than a 50/50 split of the draw, 3) a small but meaningful sales tax, and 4) a mechanism for budget reductions without impacting essential state services.
During the debate on the floor, I offered – dare I say – an excellent amendment to set the foundation for a full fiscal plan as outlined above which entailed voters weighing in at the ballot box. It removed the 75/25 split and replaced it with a 50/50 tying it to 1) passage of a constitutional amendment to fix the current spending cap, 2) a constitutional amendment to settle the PFD by requiring the PFD statute be followed (no more ignoring it as in recent years!) and to protect the fund earnings from erosion by depositing it into the principle, and 3) passage of revenue measures in the reasonable and achievable amount of $500 million (not the unachievable and ridiculous amount of $2.3 billion).
The Senate Minority considers a comprehensive fiscal plan as one that is in line with the bipartisan, bicameral Fiscal Policy Working Group’s recommendations.
Even though some members of the Majority voted against the underlying bill in the end, they chose to vote against the needed amendment to get the fiscal plan ball rolling. (I don’t know why for sure but can only guess politics played a part – showing partiality toward a Minority amendment would have added coals to the fire for them against their Majority colleagues who were supportive of the 75/25 split.) The bad-news-bill left the Senate with 12 votes for, 7 against, and 1 member excused (but in the building – Senator Kawasaki). Senators Wilson, Wielechowski, Dunbar, and Claman joined Senator Shower, Senator Myers, and me in voting against SB 107.
For the bill that is supposedly the flagship of the Senate Majority’s “fiscal solution”, it looks rather weak to have so many of their members peel from its premise and vote against it.
In discussions afterward, Senator Mike Shower who voted against the bill stated to the media, “It is time to move forward on a better path. That path is to enact a fiscal plan now. The Senate Majority plan puts the bulk of the burden of increased government spending on the backs of middle-class and poor Alaskans.”
Senator Robb Myers continued, “Passing SB 107 is a short-sighted policy that will solve the government’s problems at the expense of Alaska’s families and Alaska’s economy.”
I added, “A PFD cut is not a fiscal plan, and it is poppycock to think that it is. We as the Senate Minority stand in solidarity with House members from both caucuses and individuals from the Senate Majority who support a true comprehensive fiscal plan.”
As I did in the floor debate, we continue to do so as the Senate Minority, urging the Senate Majority leadership to work with legislators to move forward the components of a sustainable fiscal plan for a stronger and brighter Alaska.
SB 107 is scheduled to be heard in the House Ways and Means Committee. I have not heard warm fuzzies about the bill from committee members, and if it moves to the floor, I expect it will be changed quite dramatically.