All Dressed Up & Ought to Go Nowhere
Remember how I wrote last week about the governor’s proposal to put the PFD in the constitution? Well, forget that. There's a new concept in town.
SJR 6 version 2.0 is a little bit better and a whole lot weirder. Buckle up:
Improvement #1 puts a 5% limit on the POMV draw. So nobody could take out more than five percent of the Permanent Fund in a single year. (It’s actually 5% of a 5-year average, which evens out wild swings in the markets.) This beats the pants off the first version, which was just begging future legislatures to overspend the fund.
Improvement #2 protects Power Cost Equalization. Why PCE? Alaska spent zillions over the years to help railbelt communities have cheap power. Plus a tidy sum on the 4-dam pool. And we subsidize natural gas for Anchorage & the Kenai to the tune of more than $100 million every year by not taxing Cook Inlet gas that gets burned in-state. So it's only fair we have PCE to help rural Alaskans with their electric bills.
We pay for it with investment earnings from an endowment, much like the Permanent Fund. Unlike the Fund, PCE isn’t in the constitution. So it’s always in danger. We've seen many attempts to raid it over the years. SJR 6 2.0 would guarantee we keep funding PCE at some level or other "as provided by law."
Then come the crummy new parts. Version 2.0 would put what people call a ’50/50 split’ in the constitution. That means 2.5% of the fund’s total value has to get paid in PFD checks. No exceptions. That's a bigger PFD than we've had since 2016, and it will just keep getting bigger as long as the fund grows faster than the population. (It has for decades.) That would be fine if we could also pay for the services Alaskans need. But we can’t. And we need to remember the original purpose of the Fund: to pay for services when the oil ran low.
A 50/50 split means about $1.5 billion per year in cuts, new taxes, or a combination. The governor knows those kind of cuts aren't realistic without an absolute crisis. He hasn't proposed anything close. Sure, his budget this year tried to shift costs for prosecuting some crimes to local taxpayers instead of the state, and asked to close half a dozen DMVs. Those bad ideas would have cut just a few million dollars annually—nothing close to $1.5 billion.
Of course, we do need some state taxes. I support a fair share for Alaska's oil and a broad-based tax, but getting to $1.5 billion takes tax rates so high they'd drive a lot of people out of state!
The Senate Judiciary Committee considered the 2.0 version this past week. Folks are in a rush, so we moved it in a single hearing. You've heard how haste makes waste? So does sloppy, high-speed constitution writing. The committee passed some ‘conceptual’ amendments to clean up obvious mistakes or easily spotted problems. That should worry you. A conceptual amendment is when legislators say things they’d like added to the bill, without writing them down or running them by the nonpartisan lawyers who work for us. Shoot, we even had trouble figuring out what one of the words in the thing would do. The Department of Law and Legislative Legal Services disagreed about it. (Neither set of lawyers had time to think it through in advance.) But on a 4-1 vote, the rest of the committee left it in the bill. That's no way to write a constitution.
Let’s just say SJR 6 2.0 is very much still in beta version. We'll need to slow things down to do this right.
