Southeast Alaska legislators all agree that the state needs to draw from the Alaska Permanent Fund to keep state government running. They also agree that a draw is only part of a fiscal solution. It’s the other parts of that solution that they disagree over.
Independent Rep. Dan Ortiz from Ketchikan sees the permanent fund as a major asset for the state.
“You know, that permanent fund is the best thing’s that happened in the history of our state in terms of government action, and it’s really important that we preserve that fund,” Ortiz said.
Ortiz said he’s willing to use the funds to run the state government, but he doesn’t want lawmakers to open the door to an annual process of deciding how much to take from permanent fund earnings.
“No, that’s not acceptable,” Ortiz said. “We can’t do that to the public.”
Sitka Republican Sen. Bert Stedman said doing that would be too risky.
“The ad-hoc draws are very deadly because 21 and 11 – 21 members of the House and 11 members of the Senate – could clean everything out except what’s constitutionally protected in the permanent fund,” Stedman said.
To solve that problem, Stedman proposed a constitutional amendment that would limit the size of a draw from the fund and protect permanent fund dividends.
“You wouldn’t have the permanent fund to go to and just rob chunks out of,” Stedman said. “The door would be closed, and the lock on it would have been spun and you wouldn’t have the combination.”
For Stedman, this could be enough for this year. He doesn’t see the need to pass a broad-based tax now as part of the fiscal plan.
Juneau Democratic Rep. Sam Kito III disagrees. He said he’ll resist passing a bill drawing from the Permanent Fund – like the Permanent Fund Protection Act — if it doesn’t include a broad-based tax. He said including a tax as part of a comprehensive plan would ensure the plan is sustainable, and that its effects on different groups is balanced.
“I do think that it’s only a piece,” Kito said. “And I do have a concern that if we pass the Permanent Fund Protection Act without additional broad-based revenue that it will be virtually impossible to get broad-based revenue at any point in the future. And so, there needs to be some balance to the fiscal plan.”
The nonpartisan Legislative Finance Division estimated that if the legislature only draws from the permanent fund without additional revenue, there will be a budget gap of more than $560 million.
Sitka Democratic Rep. Jonathan Kreiss-Tomkins said this is why he supports taxes as part of a comprehensive plan to balance the budget in the long run. He’s concerned that if the Legislature draws from fund earnings without a plan, it will continue to draw from earnings unpredictably in the future.
“This is one of the reasons why we need to pass a fiscal plan, because you can’t live in La La Land and think you can balance the budget simply talking about government waste and cutting government when there’s really no practical way to cut government anywhere close to the amount needed to balance the budget,” Kreiss-Tomkins said.
Different versions of plans to draw from the permanent fund are currently being considered by the Legislature, including Stedman’s constitutional amendment bill. Some include taxes. Some don’t.
Emily Kwong in Sitka, Leila Kheiry in Ketchikan and Berett Wilber in Haines contributed to this report. It is part of a CoastAlaska series talking with Southeast lawmakers about the start of the legislative session.
Andrew Kitchenman is the state government and politics reporter for Alaska Public Media and KTOO in Juneau. Reach him at akitchenman@alaskapublic.org.
