Thursday’s “First Post” from Alaskans for Sustainable Budgets …

FB Ad Pic (with text)As some readers will realize from occasionally flipping through the Facebook widgets on the right side of this page, recently during this extended legislative session we have been posting somewhat extended pieces entitled “First Post” discussing issues related to Alaska’s fiscal policy.   Those pieces are available in full at the Facebook page for Alaskans for Sustainable Budgets.

Because we view this page as having a broader purpose we have not burdened this column with those daily posts. But given the significance of yesterday’s events — a series of line item vetoes by Governor Walker in advance of the start of next week’s Special Session — we are making an exception in this case and posting today’s “First Post” on this page in addition to the Facebook page for those readers who may follow this blog, but not the related Facebook pages.

Today’s column follows:

Thursday’s “First Post” from Alaskans for Sustainable Budgets: There will be several things to chew over from yesterday’s events as the state prepares for the start of next week’s Special Session, (a good summary of the day’s events is at, but we start with this.

While some will argue it is the case, Governor Walker’s actions yesterday in no way justify enacting ‪#‎permanent‬ changes to the Permanent Fund. The most significant “cut” he made (outside of the one-time ‪#‎PFDcut‬) — to‪ #‎OilCredits‬ — is not really a cut at all but a deferral of amounts which otherwise come due in FY 2017 into future years (or maybe, just to next Spring’s FY 2017 supplemental). Disappointingly given his previous statements, in an underreported event yesterday he even signed HB 247, which now codifies an extra $1 billion in spending (over the level which would have resulted in terminating the failed program) over the next four years on those very same credits.

The other cuts are much the same. Like the “cut” to #OilCredits, the “cuts” to school debt reimbursement (which drop the reimbursement levels below those provided by statute) are more a deferral than a permanent fix (which would require legislation). The additional cuts to K-12, the University and elsewhere similarly can be reversed in subsequent years (or again, even in next Spring’s FY 2017 supplemental). (A full list of the vetoes is at

In short, the Governor didn’t cut spending so much as he masked it temporarily.

As we have made clear on these pages we do not support changing the calculation of the PFD in any event because of the adverse impact on Alaska’s private and overall economies. As we have said throughout, we believe the PFD is a stroke of economic genius designed by Jay Hammond and others to help replicate the effect of oil wealth on Alaska’s private and overall economy (through creating a private economy share of oil revenues) in the same way as occurs in the L48 producing states.

Moreover we do not buy in to Governor Walker’s (and others’) claims that you have to cut the PFD to save it. Those calculations are ‪#‎entirely‬ dependent on state spending and ongoing oil price assumptions that, in the case of oil prices, are inconsistent with the consensus projections of most analysts that understand these things, and in the case of state spending levels, are entirely, ENTIRELY, within the state’s own control. Losing the PFD isn’t inevitable as the Governor claims; it only occurs if this and subsequent legislatures continue spending at current, elevated levels.

But even for those that have said they would support restructuring the PFD if the state cut spending first, yesterday’s actions shouldn’t even remotely be enough to change their previous opposition. Making a #permanent change to the Permanent Fund on the basis of these one-year — if even that — deferrals and cuts would be the equivalent of falling for a cheap parlor trick. “Look these costs are gone,” would say the magician, “now give us a lifetime endowment for making that happen.” And then the moment he walks off the stage with the endowment — oops, there they are again.

Even if you favor “restructuring” the PFD based on spending reform, at least insist on receiving tit-for-tat. You want #permanent changes to the Permanent Fund, then insist on #permanent spending reform by changing the formulas and insisting on legislatively adopting real, permanent change to the state’s cost structure (e.g., the University consolidating into a single institution) that otherwise are driving spending. Don’t fall for the parlor trick of trading mostly one-time spending deferrals for #permanent PFD changes. That is a fool’s game.

Instead, if that is your view we suggest you let the Governor’s actions rest as they lie. He made one time “cuts” to state spending; then accept a one-time reduction to the PFD. If he (or you) want more, then do the hard work next session to make the legislative changes necessary to achieve similarly permanent reductions in the state’s cost structure.

For us, we hope that the ‪#‎AKLeg‬ summons enough votes to override the Governor’s one-time PFD veto. Almost the last thing Alaska needs as it heads into (if not already in) a recession is to take even more money out of the state’s overall economy by cutting the PFD. Applying the 1.4 factor developed in ISER’s March analysis (counting the knock-on effects, each $1 distributed through the PFD produces $1.40 in Alaska income), yesterday’s decision to cut $666 million from PFD distributions this coming fall will reduce OVERALL Alaska income by nearly $1 billion.

But in all events the absolute last thing Alaska needs is for these one time, largely spending deferrals to turn into a permanent reduction in Alaska income.

So, this is our reaction to the day’s events: We can live with a one-time cut if that is where it ends up. Just don’t fall for the parlor trick and turn it into something much, much — much worse.

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