This year, the Legislature must make hard, necessary fiscal choices

Running for office is one of the hardest things I have ever done. Running is even harder than losing re-election, and now I have done both. With that, I would like to congratulate and thank the 60 legislators about to convene in Juneau and the governor for his work preparing a budget in these challenging times, and for being transparent in laying out the long-term cost of his proposals.

Each lawmaker is about to spend some intense time negotiating with 59 other legislators and the governor. Legislators, you each will be working toward what you individually believe will be best for Alaskans, balanced with your campaign promises and a self-confidence that you have the answers. You will experience constant turmoil, forced to choose between what is an immediate cost of large dividends, new taxes that may be needed to pay them, all in the context of the state’s long-term fiscal health.

I encourage you to be open-minded; to ask questions and listen. For starters, look at the impact of the governor’s proposed budget — not only for next fiscal year, but in two years, and the longer-term.

In the short term, the governor proposes to use the entire $3.1 billion annual draw in Permanent Fund earnings to pay for public services next year, plus another $3.3 billion for two rounds of dividends. On the spending side, he has proposed in next year’s budget about $295 million in spending cuts, and another $300 million in the following year. The cuts might not be fully realized, if the past is any indication.

In two years, fiscal 2023, the governor identifies that the state will again face a $1.2 billion fiscal gap. He says “new revenues” will cover it, without specifying where that revenue will come from.

The Legislature’s job will be to study the details of these proposals. In particular, they should learn more about the economic and job gains created by higher dividends. Will this actually be an effective jump-start to the economy, particularly small businesses that are suffering under COVID-19 limitations? Or are there better ways to help the economy?

The most recent study from the University of Alaska Anchorage’s Institute of Social and Economic Research suggests there is a two-month job gain when dividends go out, primarily in part-time work. But will the additional dividend money also help tourism, fishing and hospitality industries? Or will it be more beneficial to the IRS, big box stores and online retail sales?

Over the longer term, legislators need to ask how best to meet the state’s immediate needs without mortgaging the state’s future. Spending $3 billion more than what the Permanent Fund’s financial advisors say is prudent will affect the fund’s future earnings.

The Legislature and governor are going to have to decide if taking billions from the Permanent Fund to shock the economy into prosperity is the best answer. The risks and rewards should be analyzed with as little pixie dust as possible. Recognizing that Permanent Fund earnings are not a bottomless pit, what statewide taxes will the governor and Legislature propose to close the gap and ensure that these extraordinary draws on the Permanent Fund are not a permanent bad habit? The governor says next year’s overdraw will be the last he proposes; how to keep that pledge needs to dominate the upcoming session.

It will be more important than ever for citizens to speak up about what choices should be made. I encourage Alaskans go to Commonwealth North’s website on “Budget Choices” at www.akbudget.com. There, you’ll be able to share the choices you think the governor and Legislature should make to balance the budget.

It has been an honor to serve Alaskans these past four years. Godspeed to our elected officials as they face the critical decisions that lie ahead.

Jennifer Johnston is a former legislator in the Alaska House of Representatives, serving from 2016-2020. She is still proud of her vote to create the Alaska Permanent Fund in 1976.

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