Legislative Finance Division Says Permanent Fund Dividend is in Danger
David Teal says Parnell's deficits could lead to cut in PFD or income tax
ANCHORAGE: On Friday afternoon, the non-partisan Legislative Finance Division director David Teal gave explosive testimony to the House Finance Committee. Teal said Gov. Parnell's deficits are so large that they could lead to cuts in the PFD or an income tax.
"There are 2 basic options. One is a new income or sales tax combined with capping or reducing the permanent fund dividend. Those ideas have been very unpopular in this State in the past. The second, more popular option has been to reduce capital expenditures... But I'm sorry, you can't fill a 2 billion dollar deficit by cutting an 800 million dollar capital budget," said Teal.
Teal's warning about the size of Parnell's deficit follows Revenue Commissioner Angela Rodell's admission that oil production will decline for at least a decade following passage of the Oil Giveaway. On Thursday, Rodell conceded that oil production would decline, contradicting Governor Parnell's claim that production will increase.
Alaska's fiscal condition has deteriorated quickly since passage of the Oil Giveaway. Late in 2012, before the Oil Giveaway, Gov. Parnell projected an FY 2014 surplus of $500 million. Today, the FY 2014 deficit is approximately $1.9 billion, and both the Governor's budget staff and Legislative Finance project that billion dollar deficits will continue indefinitely.