The PFD, Budget Gap, Vetoes & Passing The Buck To Mat-Su

Contributed by Jim Sykes

The Legislature and the Governor failed to seriously consider the most important question, “Can we solve the state's budget gap and keep the Alaska's PFD structure?” The answer is yes, but it's not easy.  

The current structure of the permanent fund with inflation proofing, together with the PFD, are the glue that has held this excellent system together, designed to last for future generations.  Any changes need to be well thought out and that hasn't happened yet.   

The downturn in oil prices created some stress but we need to reject ideas that would quickly “restructure” the PFD by detaching it from the fund and cutting permanent fund dividends in half.  ISER's March report “Short-Run Economic Impacts of Alaska Fiscal Options” estimates that cuts to the PFD have the highest impacts on Alaskans' incomes.  

In other words, it's less harmful to Alaska's economy to pay the full PFD and let Alaskans make their own spending choices and give some of it back, rather than transferring the people's dividend directly to the government to spend. Former First Lady Bella Hammond and Alaska Constitution Delegate and former Senator Vic Fischer made that clear in a short March video.

Political infighting has kept some options from the table that need to be considered, including shaving the rate for permanent fund inflation proofing. While a huge chunk of savings was taken from the Constitutional Budget Reserve, everyone now knows that the state budget gap cannot be bridged with simple cuts. Taking half of Alaskan's PFD and handing it over to oil tax credits doesn't seem right either.  

The Governor vetoed some critical budget items that passed on some fiscal pain. It would have been good to have a little advance warning that $5.7 million would be cut from Mat-Su's school bond debt reimbursement instead of leaving the Borough and other local governments, without time to make adjustments to this year's approved budget. The Mat-Su school district took a $1.4 million cut to pupil transportation and $821,830 from the Foundation program. 

So what's Mat-Su to do with an instant chop of more than 4% of its budget? The Assembly met July 6th to take stock. First, no move was made to change property taxes or the current budget. We need to work through this thoughtfully.  

Since the legislature is headed back into another special session, the Assembly requested, 1) That legislators override vetoes affecting bonds and school district. 2) If vetoes are not overridden, then legislators could create a supplemental appropriation. While the likelihood of either of these happening is slim, at least the opportunity is there.

The Borough has kept its tax mill rate consistent - now lower than several of the past 10 years even though the Borough grew from 78,000 to 103,000 people during that time. The additional services, debt from four recently built schools and many new roads from the 2011 bond package are all carried within the current budget without a tax mill rate increase.

Two years ago Assembly Member Beck and I invited people to talk about priorities, risks and opportunities a couple years ago. Fifty or sixty people brought their ideas even though there was no pressure at that time. Now there is pressure and I will be inviting the people back for a closer look at what's in this year's approved budget. There will be cuts to projects and services. By inviting people's best ideas we can better decide what's most important to keep and how we will pay for it and avoid the toxic partisan politics as we solve our local common problems. Your ideas and suggestions are always welcome at

Meantime, legislators need encouragement to override the Governor's local school and PFD vetoes.

Jim Sykes
PO Box 696
Palmer, AK  99645

Phone 354-6962

Jim Sykes represents District 1 on the Mat-Su Assembly. The opinions stated are his own and do not reflect any official positions of the Assembly or Mat-Su Borough.