Thank you to everyone who sent me emails regarding the Governor's vetoes made on June 28. I read all of them, and you are probably getting this newsletter in response.
Yes, I read my emails. All of them. Even if we disagree on an issue, you took the time to reach out during your busy day, and I respect that and read the hundreds of messages a day I receive from fellow Alaskans.
Yes, I am very concerned about the amount and wide ranging vetoes the Governor made. Reducing costs require us to be careful, and if you make too big a splash, you create a tidal wave, and cause a wipe out. I have great concern that our limited and fragile economy won't be able to withstand this much reduction. Remember, we are only now coming out of the longest recession in our state's history. It doesn't take much to plunge us back into a tough spot with higher unemployment.
We are a small town on a big lot. I've lived in Alaska my entire life and remember the days before statehood. We've come a long way since then and, yes, that means that our government services have also grown.
Is there waste? Of course! It's government! But the Senate has been working for the last 7 years to wean government down. If we want to eliminate inefficiency in our government, we do it in a planned way. We reform how we do business. Slashing a budget doesn't change the way government works. When you need to change direction on an icy road, you don't just whip around the car and cause a pileup. You decelerate, slowly brake, look for a safe opening, and turn the wheel. Any Alaskan who made it through our winters can tell you that. The same goes for changing how our government works.
Spending cap: I agree with those of you calling for a spending cap. Again, the Senate advocated for that for the last 3 years, and even passed a spending cap. Yes, we have a spending cap in the Constitution, but when it was written (40-some years ago), it had so many loopholes that it was never going to work. As a result, the spending cap is now over $10 billion. Not very helpful!
State income tax? Some folks wrote to me about reimplementing a state income tax. Yes, that would provide about $400 million; we looked at that multiple times under the previous Governor. Alaska doesn't have a large enough population who work, or a rich enough population, to fill our budget gap with an income tax. About 1/3 of Alaskans are on some kind of government welfare program. Taxing working people to only partially fill a budget gap, without serious reforms to government programs hits our private sector without even achieving the gain of fiscal stability.
Sales tax? Sure, there's merit to that. But keep in mind, it won't fill the budget gap.
Education Head Tax? Yes, we used to have that and ended it when we discontinued the income tax in the early 80s. That won't fill the budget gap.
Your emails are telling me to override the vetoes. They tell me that you prefer services like education, courts, mental health treatment, roads, public safety, and others...rather than a $3000 Permanent Fund Dividend.
$3000 PFD: Funding a full PFD requires us to spend $1.9 billion.
Behind that $1.9 billion is the cost of what is not funded. A student to the University may get a full PFD this year of $3000, but they may not have the classes available they need to graduate, or their tuition will now be much greater than the increased dividend. The discussion of the PFD and vetoes to the budget are inextricably linked. Alaskans need to decide what they want: do they want a larger check every fall from the government and contend with courts opened less, roads not plowed, domestic violence shelters closed, and other shuttered services? We have reached the end of the line as Alaskans where we can have as much as we want, and not have to pay for it in some fashion.
That's what the Governor must be thinking about as he makes the huge vetoes to the Legislature's proposed budget. He believes that a $3000 PFD will pay tuition for the UA student, or will pay for a year of mental health treatment. I'm not sure how it will keep courts functioning, or roads being plowed or repaired. In fact, a $3000 PFD will not make up for the negative effect the Governor's vetoes will have on Alaska families, businesses and jobs.
Good news! This year, the Legislature sent the Governor a fully-funded, balanced budget! In fact, the Legislature's budget had a surplus of about $600 million extra funds! This was possible because, combined with our oil revenue and the income from the Permanent Fund allowed under law to fund our payroll, we do not have to rely on our emergency savings, or taxes, or emergency cuts to balance our checkbook. Keep in mind this important thing - the Legislature's budget has not yet funded a Permanent Fund Dividend (PFD) or a Capital Budget for roads, bridges, airports, or deferred maintenance.
The suggested Capital Budget would cost about $200 million.
That would leave about $400 million for a PFD. In that scenario, a PFD of about $900 would be issued to every qualifying man, woman and child, still allowing for a balanced budget.
2. Permanent Fund Dividend (PFD)
Before the budget vetoes, many of my emails were telling me how much government needed to be cut and a $3000 PFD check had to be written for every man, woman and child in Alaska. In fact, I received several emails from folks with 6-9 children, telling me that they couldn't afford everything their kids need without a $3000 PFD check for each child.
Here's some arguments being made in favor of a $3000 PFD:
a) Claim: PFD lifts people out of poverty. I would love that to be true! I volunteer in free clinics because I want to help lift people out of poverty. But did you know...the PFD program has a "hold harmless" feature? "Hold harmless" means that if the person is on welfare, the PFD cannot disqualify them for that welfare program (it doesn't count as income)! People aren't getting lifted out of poverty. They are just getting "mad money" (that's what we used to call extra money to spend however we wanted). If Alaskans rely on a check from the government, like the PFD, and that is what determines whether they are poor or not, we have deeper issues in this state that the PFD will not solve.
b) Claim: PFD prevents childhood obesity. I would love for this to be true! As a nurse practitioner, I know that 90% of our unhealthiness is lifestyle related. In other words, people are sick usually because they don't exercise and they eat junky foods. Researchers suggest that having a PFD allows mothers more money, and more time, to cook healthier meals for their kids. Hmmm. This is a very porous claim - lots of holes in it! And I don't want to see women who are moms depending on welfare; it's degrading. Besides...where are the dads who should be caring for these mothers and children? Bottomline, this is a red herring.
c) Claim: PFD is spent in Alaska and helps our economy. There is no evidence of this. In fact, there's more evidence that the PFD is spent on out-of-state vacations and ordering online. Evidence: Amazon Prime jets now have enough business to fly to Alaska; Nordstrom is closing its store here. And what about all those PFD travel sales, which literally encourages Alaskans to leave our state, and spend their money somewhere else but in our towns? The PFD definitely stimulates the economy in Hawaii and warmer climates in the winter. Bottomline, if we need a government check to help our economy, our economy has serious fundamental problems.
d) Claim: A PFD of $3000 "protects" the Permanent Fund. I agree 100% that we need to protect the legacy wealth fund. My parents and I voted to create the fund. But a full PFD over time will pummel the fund's income, and drain the fund. Draining its earnings using a 40-year-old formula doesn't "protect" the Permanent Fund. The Legislature tried to protect the Fund by moving about 1/2 the "spending money" in the Fund into the "guarded bank vault" of the Fund where no Governor or lawmaker could spend it. The Governor vetoed that down to a mere 1/4 of the "spending money."
So, the vetoes. What to do?
As the Senate President, I am talking with other Senators, both Democrat and Republican, about what they would like to do about the vetoes.
It takes 45 legislators out of the 60 Representatives and Senators to override a vetoed item. That's a high bar.
The Legislature's special session begins on July 8 and has five days to override any vetoes made by the Governor. If overrides do not happen, the other option to fund items that were cut is through the capital budget, which has not been fully passed.
Thanks for listening. I hope this information is helpful.
Yes, I will continue to read your emails to me. There are too many to answer with personal messages, but rest assured, I am reading them.