Gov. Dunleavy’s ’50-50′ plan falls far short of a real fiscal solution

Gov. Mike Dunleavy presented his proposal for a fiscal “plan” at a recent press event. He claimed broad, bipartisan support from legislators, but it was telling that only a single Democrat was in attendance, and that none of the co-chairs of the House or Senate Finance Committees were in the room. All in all, the event seemed more like a pep rally than a serious policy discussion.

To be fair, we should discuss the good in this proposal. First, a constitutional amendment to cap spending. Given that Alaska’s current spending cap is so high as to be irrelevant, this is a worthy goal. Second, the governor has now belatedly acknowledged the importance of the 5% percent-of-market-value, or POMV, plan we helped pass in Senate Bill 26 and proposes constitutionalizing it. We agree. Ensuring that no future Legislature can overdraw the Permanent Fund by a mere majority vote is a critical piece of any fiscal plan.

The problem here is that the governor is late to the game and has no credibility as a supporter of the POMV formula. As a state senator, the governor previously had many opportunities, including many years as a member of the Senate Finance Committee, to support this necessary restructure of how we manage the Permanent Fund. He never did. Furthermore, he resigned his office before ever voting on SB26. Additionally, from the time he was a candidate for governor in 2018 and until mere weeks ago, he was strenuously arguing in favor of overdrawing the Permanent Fund in order to keep his campaign promise of supersized dividends.

Putting the governor’s credibility issues aside, it is also clear from a closer look at the details of his proposal that it is an unsound approach and, if enacted in its current form, will actually make Alaska’s fiscal crisis worse.

Problem No. 1 is the ironic fact that the governor asks the Legislature to overdraw the Permanent Fund by $3 billion before putting the durable POMV limit in place. This amount, standing alone, means that future Alaskans will lose a source of $150 million in annual revenue, forever. It’s an obvious dodge that allows him to avoid actually balancing the budget until after a potential reelection campaign.

Problem No. 2 is the real deal killer. The governor’s plan requires the Legislature to put the Permanent Fund dividend into the Alaska Constitution at 50% of the POMV draw. This would put the payment of the PFD on the same legal ground as paying for education or public safety, and the amount would be unbreakable by any future Legislature. A quick look at our finances shows that the governor’s numbers just don’t add up. With this “50-50” plan in place, we would be constitutionalizing an approximately $1.5 billion deficit — that’s a gap of more than $4 million per day, with no end in sight.

Adding to the unworkable financial constitutional problem is elevating the dividend to a constitutional right alongside freedom of speech, the right to keep and bear arms or any other right meant to limit or direct government.

In bowing to public pressure and withdrawing his vetoes in 2019, even this governor has conceded the budget cannot be cut by even a fraction of the $1.5 billion gap. And no suite of taxes has been proposed that could possibly produce it.

In short, this plan is unworkable and unrealistic. And it would force Alaska to fight for its future with one hand tied behind its back.

Gov. Dunleavy also lacks the trust to lead this debate. In his most important address of the year, he used his 2021 State of the State address to promise to send $5,000 to all Alaskans — a proposal the ADN editorial board rightly condemned. The price tag? A $3.2 billion overdraw of the Permanent Fund, on top of the $3.1 billion allowed by SB26. This governor has repeatedly tried to push Alaska onto a road to fiscal ruin, and only the resolve of certain legislators has prevented it.

As the Alaska Legislature enters its first special session this year, we urge it to either reject the governor’s constitutional amendment outright, or to change it to solely institute the 5% POMV — which, by itself, could be a critical legacy toward Alaska’s fiscal stability.

John Coghill, a Republican, is a former Alaska state senator from Fairbanks.

Cathy Giessel, a Republican, is a former Alaska state senator from Anchorage.

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