Alaska Legislative Digest- Supplemental Commentary
By: Mike Bradner
Sen. Bill Wielechowski has introduced a proposed constitutional amendment, SJR-1, that would constitutionalize the Permanent Fund dividend. This would essentially take Fund income off the table for spending on the basic purposes of government, such as schools, health and social needs, public safety, and transportation that might be needed under emergency fiscal conditions.
We’re not picking on Sen. Wielechowski, but he volunteered to be part of this discussion!
Basic Politics 101: What’s the primary purpose of government?
The primary purpose of government, Sen. Wielechowski, is to provide public services, not to pay the public a cash dividend. The latter may be feel good politics, but it lacks a place in the fundamental role of government.
None of us know how this fiscal crisis we’re mired in is going to work out. The odds are we’re not going to get through it without some significant budget reductions, harsh enough that they will also put revenue necessities on the table.
Revenue necessities - taxes!
These “revenue necessities” are polite words for “taxes,” money we will have to pay-citizen taxes they’re called. In the agenda of revenue, use of Permanent Fund income, is also a revenue, citizens surrendering a portion of their dividend for public services.
State lawmakers, as well as governors, in recent years have lived in a political environment where taxes have not been part of the discussion with the public.
Taxes is a political “choke word”
Alaskans seem to have a speech impediment. They can say Tanana, Tutatuliak, Tallahassee, Texas, Tatalanika. But ask them to say “taxidermy,” but hold everything after the “x” and they’ll choke up, and perhaps go into apoplectic shock. On the state level, taxes have simply been off the table for decades, not discussable. As a result, the “political culture” of such discussions is also a blank.
Politicians have to “facilitate” bringing taxes to public discussion
This isn’t to be taken lightly. Politicians have to work up to a dialogue about taxes, as well as use of Permanent Fund income. No one has to rush the barricades. But politicians do have to facilitate “this language,” gradually bringing the public into the discussion. Notice we used the word “facilitate.”
One of the political skills of politicians, especially when they face politically hazardous, and unavoidable, issues is to use their political skills to insure that such issues get on to the table. If they can’t personally touch the issues, then the skill is getting less vulnerable parties to push the issues on the table.
We have not had to deal with revenue issues within the institutional memory of most of our present lawmakers, so it should be no surprise they are reluctant to engage such discussion.
No one yet has put revenue discussion on the table!
• In the aftermath of the 2008 financial crash, and subsequent recession, the first action of many states across the country was to put all their revenues, fees, tax exemptions, and etc. on the table for review (not necessarily advocacy).
• Such a review of our revenues options has yet to occur.
• The recent Commonwealth North report (by people who don’t have to stand for election) managed to do a volume of work without putting revenue issues on the table. They had the opportunity, but made only a reference to such future work.
Talking taxes is politically hazardous, to be sure!
Talking taxes is a hazardous process to be sure. By nature, politicians avoid being first to grab the “third rail” of new and controversial issues. Nurturing revenue issues forward is a delicate dance between legislative leaders, majorities, minorities, and individual lawmakers. Many lawmakers come from districts where such issues may be far more hazardous than others. Then there is the governor, who has a singular constitutional responsibility to lead.
Legislators need to think about the fact that they don’t have to be elected forever.
There is life after politics. They may well have to stand up among flying political bullets. They may survive, they may not. The history of such revenue/tax combat is that the voters, of course, do react. They come down hard on a “tax legislature.” In fact, voters in reaction often don’t distinguish between those who voted for taxes and those who did not - they just whack them all.
However, even where there is a quantum shift in makeup of a Legislature, the new body rarely repeals such taxes. They may move some decimal points, and make political noise, but the revenue enactments generally remain “in place” – they were necessary. However, we are told that many lawmakers who bite the bullet often later get elected again. They apparently were respected for their courage.
Facing up to tough issues, not passing the buck!
Politicians are elected to do what? They are elected to look at complex issues, and at a greater depth than the general public, being busy with their daily personal lives can possibly do.
However, there are many of the elected willing to duck such issues, pass the buck to the public. We’re talking about putting a revenue issue out at public referendum - let the public decide. The result of such a political dodge is that there will be only one answer by the public - that will be an emphatic “no.”
Once putting a tax issue to a public vote, lawmakers are stuck with that as “precedent.”
The odds are repeated efforts will just bring repeated rejection.
Income tax, sales tax, or use PF income
The question for such lawmakers who dodge responsibility and pass the buck to the public is:
• “Why the Hell do we elect you.” We elect people to make the tough decision.
The best test of the necessity of a tax is when politicians lay their futures on the line and “do it.”
In the future, like it or not, lawmakers will likely face choices that involves enacting an income tax, a sales tax, and use of Permanent Fund income.
What we “are not” as a state!
We need to remember we are not a “usual state,” we are not Maryland, Delaware,
New Jersey, Connecticut, New Hampshire, Vermont, which you can walk across in a day. Nor are we Ohio, Indiana, Illinois, Iowa , Wisconsin that you can easily drive across in a day. These are states where a kilowatt of electricity can flow border to border, where the tax bases of local governments are relatively uniform, where local governments can support many services without state assistance.
As a state “what we are”
We are is a state that superimposed over the contiguous United States would stretch coast to coast, a fifth the size of the contiguous states. We have two-thirds of the shoreline, an extensive fishery, 82 percent of our communities are connected only by air, the state operating 247 airfields. One marine highway system stretches 1,619 miles along our coastline.
We operate school systems unconnected by roads, and where individual school sites are unconnected from each other. The densities of school populations and school costs defy efficiency in Many of these areas lack a local tax base in the traditional sense. Costs for electricity and heating oil is prohibitively high, climate restricts fuel deliveries to once a year. Community infrastructure is costly and difficult to maintain- water, sewer, waste treatment, and solid waste.
We have gained in our core regional efficiency!
Today the good news is that the costs of our railbelt region (Seward to Fairbanks) are pretty good in comparisons with elsewhere. The same is true for our Southeast Alaska cities and boroughs. The bad news is that a lot of “other Alaska” still has a high cost profile.
All this being said, our windfall of oil revenues due to the 2008 ACES tax, and the escalation of oil prices worldwide, has allowed our budgets to soar.
We can reduce budget, but also have to have a mix with new revenues. A good end result comparison might be with similar core areas in other states.
The same goes regarding what people pay for their services in these ad hoc comparisons.
So what’s going to happen now?
Somewhere here lawmakers have choices to make regarding budget reductions and balancing reductions these with a mix of different kinds of new revenue. Our budget spending is still constrained by oil prices. While we may adopt new revenues that are more predictable, our reliance on oil prices will remain, and oil price will likely remain volatile for some time to come.
There’s a lot more ahead of us!
There is a lot more ahead of us regarding a host of issues that revolve around budget situation. We will have ongoing special reports exploring the shadows of emerging policy. Right now lawmakers are pretty much just looking at budget reductions, disregarding revenue. They are assessing what is structurally possible and over what kind of time span. Cuts take time to implement, programs time to dismantle and phase out. There are also contracts. Likewise new revenue take time to put in place.
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