Some of the key players in legislative efforts to reach a compromise on a long-term fiscal plan for the state — in addition to settling on an amount for this fall’s Permanent Fund dividend — say growing regional, political and economic differences, plus a large number of first-term legislators, make the effort harder.
“To find a common ground means people have to give up something,” said Anchorage Sen. Natasha von Imhof.
That compromise of spending versus revenues versus dividends has to add up to a solution that balances the checkbook and “does not cripple our state” for future economic growth, the Senate Finance Committee member said in an interview last Friday.
“The biggest issue is that we are a representative government, and the Legislature represents the different viewpoints all around Alaska,” the senator said. “People’s perspectives are different,” increasingly influenced by which state services they use, their household size, how much they may depend on the PFD, how much they might pay in taxes — if the state were to adopt any new taxes.
“People vote their pocketbook,” and Alaska, like much of the nation, has a wide diversity of household incomes affecting what people want out of government, what they want to pay and how much they can afford to pay, she said
One of von Imhof’s Senate colleagues, Sitka Sen. Bert Stedman, sees the geographic and economic differences between Alaskans widening, and adding to the strain to find a compromise.
Looking over his 19 years in the Legislature, Stedman said, “The most concerning issue is the resurfacing of the urban versus rural divide.” Those differing perspectives helps determine what residents think is important, what should be included in the state budget, and what can be cut.
“There is an apparent philosophical difference between families who have been here multiple generations and people who have been here a very short amount of time,” he said in an interview near the end of the regular legislative session in May.
Stedman, co-chair of the Senate Finance Committee, sees some of the most noticeable differences in attitudes over the Permanent Fund dividend, financial aid to residential electricity customers in rural communities, and village water and sewer improvements.
“The Power Cost Equalization is at risk of elimination by a handful of legislators,” Stedman said of the rural aid program, which is in jeopardy if lawmakers cannot muster a three-quarters majority vote when they reconvene in special session in August.
The division also shows up in legislative debates over funding public services in small communities, such as driver’s license and vehicle registration services, and school expenses in villages without a sufficient tax base for a local contribution.
Reapportionment of legislative seats for the 2022 election based on the 2020 U.S. Census could further erode the count of rural lawmakers, as population gains in Southcentral Alaska will continue the ongoing shift of seats and political influence to that region.
Lawmakers are scheduled to convene in special session Aug. 2 to decide on this year’s dividend and work toward a long-term fiscal plan, with an eight-member joint House-Senate working group meeting to look for compromises and take public testimony this week.
Many of those same diverse constituencies that have divided policy makers may now be coming together to push toward a solution to the state’s long-term finances, said co-chair of the working group, Sitka Rep. Jonathan Kreiss-Tomkins.
“There are constituencies within the political system that I’ve never heard from … who are saying this is a problem that must be solved,” the representative said.
There is a growing recognition among Alaskans “from across the political spectrum,” Kreiss-Tomkins said last Friday, that new revenues — taxes — will be needed.
The state has operated at a revenue deficit most years since 1990, as declining oil production has fallen short of state spending, pushing lawmakers and governors to draw down billions of dollars from savings.
The high-profile divisions over state spending also extend to battles over raising new revenues to pay for public services, Stedman said, exacerbated by unachievable campaign promises.
As legislative candidates tell voters they will oppose any new taxes, it’s hard to tell those same voters that the state cannot afford all the services and large PFDs they may want and have come to expect.
One solution supported by the governor and some legislators is to withdraw more money from the Permanent Fund this year to cover larger dividends and other spending, promising not to do it every year. Stedman is one of the loudest voices in the Legislature against drawing down the fund for short-term benefits, which would jeopardize its long-term earnings potential.
Part of the problem in reaching compromise is that almost half of the state House came into office in the past two elections, said Juneau Rep. Sara Hannan, one those new members. A dozen members of the 40-member House are new this year.
The lack of understanding of the issues is a challenge, she said, particularly for public services unique to some areas of the state.
Such as Hannan’s advocacy for state funding for the Alaska Marine Highway System, which has endured deep budget and service cuts in recent years, presenting significant challenges for coastal communities dependent on the transportation service.
During a town hall meeting in Haines earlier this month, she explained her efforts to educate Southcentral and Interior legislators who may not know that many travelers to their districts arrive in the state by ferry.
Before the pandemic closed the border with Canada, a large chunk of ferry travelers would end up in Anchorage or Fairbanks, particularly military families moving to Alaska, Hannan said.
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