The central shame of this session of the Alaska Legislature is the failure of legislative leadership to take any of the most obvious steps, eventually inevitable, to rein in the deficit. Continued dithering will promote an early and deep recession.
The state income tax must be restored at least to the level prevailing at the time of its repeal before touching the Permanent Fund dividend and Permanent Fund earnings. Would you rather pay $1,000 a year in state income tax (maybe that high if you make $100,000 a year), a tax that also picks up millions from out-of-state free riders, or lose more than a hundred thousand off the value of your home? Legislatively induced population loss, and fear of more, will do just that.
Unfortunately, the leadership seems to be incapable of recognizing the causes and cost of statewide recession. Lacking a larger understanding of the state's economy, they protect the bridges, dams, roads and other boondoggle projects as well as the corporate subsidies derived from campaign contributions and left over from $100 oil. Instead they fiddle with program cuts having a net effect of deepening the threatened recession. The Legislature is giving us Piglet's gift to Eeyore instead of the substantial solutions that every independent economist says are necessary.
The fact that the state has but one economy, with public and private sectors inescapably intermeshed, is strange territory to most legislators. Whacking standard government expenditures has a boomerang effect. To use a popular term, the economy, public and private, is all one ball of wax. Reducing state employment and services contributes to recessional trends.
They don't understand that a cut of $50 million in the university's budget will mean the loss also of hundreds of jobs in the private sector. Every job gone, public or private, results in a thinning of the consumer population and thus sale losses resulting in more job losses.
A reduction in the PFD of $1,000 will also produce big job losses as consumer spending drops by hundreds of millions of dollars and public backup goes up. Most Alaskans are selling something. Missing or nervous buyers mean loss of sales. We are in for a recession, but it can be a mild recession, as the minority of Alaskans wealthy enough to pay income taxes have a bit less to spend.
A substantial proportion of Alaskans, including government employees, are in a position to seek jobs elsewhere. The U.S. economy is doing fine. Sell now, since home values are heading for a crash. A large number of Alaskans were planning on leaving the state anyway, retiring in the next decade or so. For them, maybe the time to leave is now.
How do we avoid plunging over a cliff that will leave the state a scarcely recognizable mix of shabby public service and reduced population? Ironically, Alaska can slide into recession simply by not immediately and forcefully addressing the problem. The cash to fund the budget deficit, most of which should be held for its investment income, is available for about three years.
The public is watching. Is the Legislature capable of reversing the outflow of money to oil? Alaskans reasonably wonder whether their state is an "oil state" not for its production but for its political control by oil companies.
Will the governor direct his administration to audit the tax avoidance strategies of the oil companies, including the outrageous practices suggested by Shannyn Moore in her May 1 Alaska Dispatch News column? Can he, with his veto power, ditch mammoth projects, primarily of benefit to folks who don't live here, including a rethink on some in his original budget?
Are taxes so scary that a half dozen or more taxes from an effective 1 percent income tax to taxes on alcohol, mineral royalties, fisheries or gasoline can't be enacted? Sure, no one tax is "significant" but, added up, they make a real difference. If they can't do it, start planning your exit.
One other possibility: In November, throw them all out. Get a new Legislature with the guts to show a profile in courage. If you don't remember Winnie the Pooh, Piglet's gift was an empty honey jar holding a balloon with a hole in it.
John Havelock, a retired professor of justice, served as Alaska's attorney general in 1973, directing a revision of the state's oil tax and regulation regime.
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