PFD political compromise works for a year

 


The Alaska Legislature is no different than a typical American household – torn between spending every last dollar from their paycheck on immediate wants or saving some for the inevitable future needs.

When the wants win out, money often is short for the needs that come later.

That pretty much sums up this year’s political battle over the amount of the Permanent Fund dividend.

The bipartisan Senate favored an affordable PFD that would not require drawing from savings; the House Republican-led majority wanted to take hundreds of millions of dollars from savings to make this year’s PFD larger — and not worry too much about the future. At least not past their last election pledge and next reelection campaign.

The two sides haggled the entire session, as is the annual ritual in Alaska politics. Sort of like spring breakup — a generally ugly time of year.

Then a compromise was set on the table. Not the obvious math of a compromise number between the Senate $1,300 PFD and the House dream of $2,700. Such a split-the-difference sort of compromise would have still required drawing down from savings, which is not a smart way to run household finances.

The proposal that came out of the Senate Finance Committee, which the Legislature finally adopted, is fiscally responsible. It pays out a $1,300 dividend this fall. And then, if the state gets rich, or at least richer, off high oil prices over the next 12 months, half of the windfall would go out next year in an extra payment to Alaskans and half would go into savings.

What could be fairer than 50-50?

And what could be smarter than waiting to see how much money you have in the bank before writing checks.

The expectation is that the state spending plan approved by legislators last week balances if oil averages around $73 a barrel over the next fiscal year. (Prices started this week around $75.) But if it comes in higher, as it did in 2022 when Russia’s attack on Ukraine disputed world oil flows and drove Alaska North Slope oil near $128 a barrel at the peak, individual Alaskans would receive half the additional cash, up to about $500 per person.

As an added bonus for the anti-tax sentiment in Alaska, the supplemental check would be called an “energy relief payment,” which the IRS has determined is not subject to federal income tax.

The state treasury would run the numbers on oil revenues and determine the size of the extra payment — if there is one — after Alaska closes the books on the fiscal year ending June 30, 2024.

Which means Alaskans will need to wait a year to see if they will have extra money to spend. Of course, this assumes the governor does not veto the provisions in the budget bill.

Artful as it is, the compromise ensures that lawmakers will be back at the negotiating table next spring, looking for a permanent answer to the size of the PFD. But at least the state will have a healthier savings account until then — just in case oil prices go down, not up, and the state has to draw on savings for its needs.

 

Reader Comments(0)

 
 

Powered by ROAR Online Publication Software from Lions Light Corporation
© Copyright 2024