Democrats Push Permanent Fund Dividend Protection In Light Of Oil Giveaway
April 3, 2013
JUNEAU - Today eight Democratic legislators filed legislation to protect the Permanent Fund Dividend by placing the current dividend formula in the Alaska Constitution. With GOP leaders pushing an oil giveaway that is likely to cost Alaskans upwards of $1 billion or more a year, future legislators are likely to start cutting the Dividend to fund state revenue. To protect against attempts to spend the Dividend in tight economic times, former Governor Jay Hammond proposed an initiative in 2002 that would have enshrined the Dividend in the Constitution, but Lt. Governor Loren Leman rejected it as not able to be done by initiative.
“Governor Murkowski tried to tap the Permanent Fund in 2003-4 to make up for budget deficits. The burden of a poorly crafted oil giveaway shouldn’t fall on those who need the Dividend to pay for heat, food, clothing and basic necessities,” said Representative Les Gara (D-Anchorage), prime sponsor of the House Joint Resolution 17. Rep. Gara opposed the 2003-4 attempt to cap the Dividend.
“Alaskans should be able to rest assured that the Permanent Fund Dividend will be there for our kids and grandkids,” said Senator Bill Wielechowski (D-Anchorage), prime sponsor of the companion Senate Joint Resolution. “The program was established to ensure that all Alaskans share in our natural resource wealth and to help protect the body of the fund from wasteful government spending. Enshrining the dividend in the constitution will accomplish these goals in perpetuity.”
According to the Department of Revenue, the Legislature is in deficit spending for the current fiscal year. Long-term deficits are more likely if the state loses roughly $1 billion or more in revenue.
“We’ll keep pushing for smarter oil reform that doesn’t create a fiscal cliff. But with constant pressure from the governor to give away our oil wealth, it’s time to protect the Dividend by placing it in the Constitution,” said Gara.
The House and Senate resolutions would place the current Permanent Fund Dividend statute into the Constitution, and require that future dividends be the same or greater than they would be under current law. If passed by a two-thirds majority in each legislative body, the constitutional amendment would appear on the next statewide election ballot.
“The Permanent Fund Dividend in an important economic driver in Alaska, and cutting it to make up for oil revenue the governor gives away would harm the economy,” said Representative Scott Kawasaki (D-Fairbanks), a co-sponsor of the constitutional amendment.
According to a 2010 UAA Institute of Social and Economic Research report, “most of the cash from dividends will ultimately find its way into the Alaska economy to increase employment, population and income. A rough estimate of the total macroeconomic effects of this increase in purchasing power is 10,000 additional jobs...” The report also concluded that the Dividend generates roughly $1.5 billion in additional personal income” for Alaskans.
The Dividend is also becoming more and more important as a driver for non-profit services in Alaska. Last year, 26,000 Alaskans pledged a record $2.45 million to Alaska non-profits through the Pick. Click. Give. program.
Democrats have proposed oil reform legislation that targets the production of additional oil, and would take pressure on the Dividend by ensuring a steady flow of revenue for the state.
The Democratic oil tax proposal includes a 7-year tax incentive for oil developed in new fields, incentives for production of Alaska’s vast reserves of heavy oil, and incentives for increased production in existing fields. Their bills would also reduce tax rates at very high prices, near $150/barrel, to better balance the state and company share of profits at very high prices. The Democratic oil legislation, House Bill 111 and Senate Bill 50, would not have any immediate impact on state revenue, and would require Alaska investment in order to earn tax breaks.
The largest part of the Governor’s bill, and legislative versions of it, gives away most of Alaska’s windfall profits share, a tax surcharge that allows Alaskans to share as oil company profits grow to record and near record levels at very high prices. There is no requirement that companies spend the money they receive from this rollback in Alaska.
House co-sponsors include House Democratic Leader Beth Kerttula (D-Juneau), House Democratic Whip Chris Tuck (D-Anchorage), Representative Harriet Drummond (D-Anchorage), Representative Andy Josephson (D-Anchorage), Representative David Guttenberg (D-Fairbanks), and Representative Jonathan Kreiss-Tomkins (D-Southeast).
Read the ISER report: http://akdemocrats.org/docs/040213_PFD_case_study.pdf