We understand his perspective. On average in Rasmuson's income bracket, PFD cuts amount to less than 2% of annual income. A small price to pay, in his view, for fiscal stability.
But what he ignored then, has ignored since and continues to ignore even in his most recent op-ed in the Alaska Dispatch News is the toll that approach takes on the overall Alaska economy and the other 80% of Alaska families. See "Here’s my Alaska fiscal prediction — and may events prove me wrong," http://bit.ly/2wlMKOu.
The economic analyses published these last two years consistently have reached the undisputed conclusions that cutting the PFD:
- "Has the largest adverse impact on the economy [of all the new revenue options] per dollar of revenues raised," https://goo.gl/ZxR1Hw at A-15;
- Is "by far the costliest measure for Alaska families," https://goo.gl/ivf9D2 at 1; and
- "[W]ill likely increase the number of Alaskans below the poverty line by 12-15,000 (2% of Alaskans)," https://goo.gl/iuTjv2 at 14.
Because it also is heavily weighted with PFD cuts, even the House's so-called "balanced" plan still provides a huge advantage to the Top 20%. Under that plan the lowest 20% still suffer more than a 24% loss in annual income, the next 20% (20-40th percentile) more than 12%, the next 20% (40-60th percentile) more than 7.5% and the next 20% (60-80th percentile) more than 5.5%.
The Top 20%? Even under the House plan, inclusive of the income tax the archetypical family of four still experiences only a 4.5% reduction in income, more than 5 times lower than the income cut imposed on the lowest 20%, 4 times less than the next 20% and still less than half of the next 20%. See "Studying the Impact of the Senate and House new revenue measures," http://bit.ly/2v4Ti4f.
In sum, while Rasmuson and others in his income class would pay some of their income to help fund government under either plan, the remainder of Alaskans would proportionately pay a lot more, the overall Alaska economy and most Alaska families would be worse off and roughly 2% of the total Alaska population would be pushed below the poverty line.
From the perspective of the overall Alaska economy and the vast bulk of Alaska families, those should not be -- and our guess is if put to a direct public vote, would not be -- acceptable outcomes.
In his most recent piece, Rasmuson laments the potential failure of the legislature to come to grips again this coming session with the state's fiscal situation in the way he desires. We suppose we might also if our goal was permanently to push the costs of government off on someone else without regard to the adverse impact that might have on the overall Alaska economy, the bulk of Alaska families and Alaska poverty levels.
But another year of continued public discussion and education on the issue is infinitely better than Rasmuson's favored solution of adversely affecting the overall economy and Alaska families permanently through formalized, long term PFD cuts.
Put differently, it's better to continue the current status quo than enact something that permanently puts the overall Alaska economy and the bulk of Alaska families even further into the hole just to help out a government-favored few.
For obvious reasons -- because they anticipate they would lose -- advocates of deep PFD cuts have opposed holding a public referendum on whether to make a permanent change to the way the PFD is calculated. But if Rasmuson's newest prediction and lament -- that the legislature now is unlikely to do that next session -- comes true, then we will come to that anyway, albeit indirectly in the form of the 2018 gubernatorial and legislative elections.
While we would prefer a direct up or down vote, an indirect vote is still an acceptable outcome to us because it will put the heat on candidates directly to speak on the issue rather than hide behind the charade, if Rasmuson's favored outcome had passed earlier, of "well I would have voted differently but it's already done now so it's time to move on."
Because the issue has such a deep impact on the overall Alaska economy and the bulk of Alaskans, in our opinion it should be decided through an election, even if somewhat indirectly, rather than rushed through the heavily lobbyist-influenced, Juneau bubble driven legislative process.
That public debate also will help focus on the fallacies underlying two other parts of Rasmuson's piece.
The first is Rasmuson's -- and others' -- attempts to reclassify the PFD as as part of the "general fund" budget. It is not.
Like the payments to the members of the Osage Nation we discussed in a previous piece, see "The PFD isn't 'state revenues,'" http://bit.ly/2ipWGRa, by explicitly providing that the funds are to be paid directly from the Permanent Fund Corporation to the dividend fund and then from that fund directly to the Alaskans that qualify, the statutes governing the PFD make clear that the funds bypass the general fund and are designated for a specific use.
Essentially, like the federal government in the case of the Osage Nation, the state serves only as a temporary collection and distribution agent through which the funds flow briefly on their way to the qualified Alaska recipients.
Attempting blithely to reclassify them as "general funds" -- and thus, redirectable at government whim -- is a transparent attempt to minimize the efforts of Governor Hammond and those who spent so much time and effort carefully to make certain they were separately protected.
The second is Rasmuson's claim that "the earnings reserve ... is part of the Permanent Fund" (which then leads to his bootstrapped claim that "we are imperiling the corpus of the Permanent Fund").
No less than the Constitution refutes that. Article 9, Section 15 -- which establishes the Permanent Fund -- reads as follows:
"At least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law."The earnings reserve account is made up of the income produced from the Permanent Fund. The provision makes clear that those funds are separate and not part of the Permanent Fund. Additionally, Section 15 makes clear that the income from the Permanent Fund can be separated from the general fund if otherwise provided by law. The PFD statutes otherwise provide by law, legally segregating the funds covered by those statutes both from the Permanent Fund and the general fund.
Without those two foundations Rasmuson's claim that the earnings reserve is somehow protected, that the Permanent Fund is in peril and that the PFD is somehow part of the general fund fall apart. That is not how the founders of the Permanent Fund and PFD constructed them.
In short, we think Rasmuson's lament is good news rather than bad. The overall Alaska economy and the great bulk of Alaska families will be better off if the changes favored by Rasmuson and others in the Top 20% are not enacted this coming session, and those issues instead become a centerpiece of the 2018 election.
Between the CBR ($3.9 B as of July 31) and earnings reserve ($10.8 B as of June 30) Alaska currently has something approaching $15 billion in remaining savings. There is time enough to let Alaskans weigh in and get this right, rather than getting something that makes the overall economy and the situation faced by the vast bulk of Alaska families even worse.
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