The choices Alaskans are making when they vote for legislative candidates this year have a major impact on the future of the state’s largest savings account. Most legislative candidates say they want to protect the Alaska Permanent Fund’s earnings reserve. But some candidates are staking out positions that could drain the account.
Two races show what’s at stake.
Robert Myers is a Republican running to be a state senator for a district near Fairbanks.
He’s a North Pole truck driver who defeated longtime lawmaker John Coghill in the Republican primary. Myers is campaigning in support of paying full permanent fund dividends.
He said voters showed their support for full PFDs by electing Gov. Mike Dunleavy two years ago and by supporting candidates like himself in the primary.
“The public as a whole, while recognizing the challenges that the state is facing — because of declines in oil prices — also wants the cut to the dividend to be the very last option, rather than the very first,” Myers said.
Since oil prices fell in 2014, legislators and governors have cut the state operating budget by more than 20%. But they’ve also drained $18 billion from the Constitutional Budget Reserve and the Statutory Budget Reserve.
Now they’re pulling funds from the $11 billion earnings reserve and splitting them between paying PFDs and funding state government.
But the more money you spend on one, the less you have available to spend on the other.
Paying full PFDs would leave a $2.3 billion hole in the state budget.
Myers has talked about cutting spending to reduce that hole. But he declined to name specific cuts other than lowering spending on public education and Medicaid, both of which face significant political and legal obstacles.
“It boils down to math,” Myers said. “The biggest programs are going to end up with the largest cuts. And that’s just the way it’s going to be.”
Myers also wants to spend all other state reserves first — including those that subsidize the cost of electricity in high-cost areas and pay for college scholarships and grants. He would pay for those programs with other state funds, along with the rest of the budget. But he hasn’t presented details on how to balance the budget beyond next year.
Marna Sanford is Myers’ opponent. She coordinates government relations for Tanana Chiefs Conference and is an independent running with support from the Alaska Democratic Party.
Sanford said the only way to protect the earnings reserve is to change the formula that calculates the size of the dividend.
She said it’s impossible to balance the budget with only cuts. The size of the deficit is more than half of the size of the state operating budget.
“I do support the PFD and that’s why I want to change the statutory formula,” she said. “And I think that those are the only two statements that can live together.”
She pointed to the numbers. The Alaska Permanent Fund Corporation estimates that after lawmakers draw funds this year and the next, there will be $6 billion left in the earnings reserve.
Sanford said that without changes to the formula, there would be no dividends at all in a few years.
She said Myers and other candidates who talk about budget cuts refuse to say what cuts they’d support.
“I’m waiting for any single one of those people to come up with that list and present it to their constituents and say, ‘Here’s what the constitution says we have to fund and here’s what we don’t have to fund,’” she said. “Not one of them has done that, which speaks volumes to me, because they know that it would be wildly unpopular. And I would also hazard a guess that it doesn’t balance the budget that they’re proposing.”
For his part, Myers pointed out that while Sanford has expressed openness to introducing a broad-based tax, she hasn’t put forward details on whether she supports a statewide income, sales or property tax.
A third candidate on the ballot in the district — independent Evan Eads — has dropped out of the race and endorsed Sanford.
Myers is one of several Republican candidates running for the Legislature who oppose dividend cuts. But some Republican incumbents in competitive districts are signaling an interest in compromise.
Republican Rep. Sara Rasmussen is running for re-election in an Anchorage district that includes Sand Lake. She said it’s important for the dividend formula to be as high as possible and to be set at a level the public can rely on.
She likes the concept put forward by Dunleavy of putting any change to the formula to a vote of the people. She also said the concept of putting a change to a vote of the people could be the subject of negotiations.
But Rasmussen also doesn’t want to draw more than the Legislature has planned from permanent fund earnings.
“It’s going to be tough, but I don’t support the unsustainable government spending,” she said.
Rasmussen said a balanced budget will require give and take.
“Everybody will have something in it that they don’t like,” Rasmussen said. “But there’s going to be something in it that everybody has that they do like. And that’s really, kind of the compromise.”
Rasmussen is interested in making changes to lower the cost of school funding. She cited the example of changing the school funding formula to reduce the incentive for Anchorage to maintain smaller schools. She’s also open to introducing more gambling to the state, including card rooms.
She said the first step in the next legislative session should be a change to the limit on state spending.
Rasmussen added that she’s opposed to an income tax but would be willing to consider a sales tax if more spending cuts are reached.
Independent Stephen Trimble is running against Rasmussen. He also has Democratic support, as well as that of independent former Rep. Jason Grenn, who Rasmussen defeated in a three-way race two years ago.
Trimble supported setting the dividend formula at a lower level in the near term, with a goal of returning to the original formula in the future.
“We have to make hard decisions,” Trimble said. “And they have to be for the betterment of the state. And some of those may be unpopular, but we need to have the political courage to make them.”
He said any taxes or other budget solutions shouldn’t be taken off of the table.
He said voters he’s talked to oppose deep cuts to public education. And he said requiring a public vote on changing the dividend formula would make it harder for lawmakers to reach a compromise on a spending plan for the future.
Not every candidate in the race is talking compromise. David Nees has run for several times for different public offices in recent years without winning. He’s also running for Rasmussen’s seat as the Alaska Independence Party candidate. He supports the full dividends under the 1982 law as well as paying back the more than $4 billion in dividend reductions over the past five years. While that would completely eliminate the permanent fund’s earnings reserve by 2022 under current projections, Nees isn’t deterred.
He said experts have made similar predictions more than 20 years ago.
“Basically they said the same thing: ‘We’re going to be all out of money and the sky’s going to fall.’ Well, the sky didn’t fall, and we didn’t run out of money,” Nees said, adding that he’s an optimist.
He said he thinks the price of oil will go up.
Andrew Kitchenman is the state government and politics reporter for Alaska Public Media and KTOO in Juneau. Reach him at akitchenman@alaskapublic.org.
