OPINION: This year’s PFD is affordable, but it’s not sustainable

Alaska is receiving an unexpected production tax windfall resulting from high oil prices.

A good part of this year’s legislative session was spent deciding what to do with the surplus — spend it or save it?

The compromise result was some of both, although for a while it appeared that runaway spending would even exceed the windfall!

Thanks to all of the responsible legislators who voted to achieve a reasonable balance by funding essential state services, boosting the anemic capital budget, providing for a windfall permanent fund dividend, providing energy assistance for individual Alaskans, and setting aside some savings which will help when winds of financial fortune turn on us again.

While next year’s budget is likely to balance if oil prices stay high, it is important to keep in mind that there are three major future risks: Permanent Fund investment earnings, volatile oil prices and high inflation. The House and Senate Finance Committees used their Legislative Finance Division to run various scenarios based on future assumptions of expenditures and revenues. The Committee members use those analyses to measure those risks.

This year’s Permanent Fund dividend, coupled with the energy assistance payment, are affordable this year because of high oil prices. But they are not sustainable once oil prices return to long-term averages. Or if inflation continues to run higher than normal. Or if the stock and bond markets have several years of losses resulting in substandard returns.

So, appreciate the check when you receive it this fall in an election year, but don’t count on a similar amount in the future.

We can keep essential state services, a smaller but sustainable dividend check, and a good economy without new taxes, but only if our Legislature remains financially responsible. Don’t overdraw the Permanent Fund. Don’t impose taxes merely to pay for a high dividend. Don’t cut essential state services.

Pay attention to your legislators’ position on each of these issues and use your common sense to interpret their answers.

Carl Marrs is CEO of Old Harbor Native Corp. and the chairman for Alaskans for Common Sense. He previously worked at CIRI from 1973 to 2004, serving as its president and CEO from 1994 to 2004.

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