Like it or not, the $2,300 PFD is a major turning point

Though whether it’s a turning point for the better or the far worse has yet to be seen.

Happy Friday, Alaska! Thank you to everyone who’s been tuning into this newsletter throughout the session. It’s personally been a very refreshing way to write about session and helped organize what is typically a pretty mad house time for me. That all said, I’m very happy to see the end of the regular session grind.

In this edition: A look at the road ahead with session, the turning point for Alaska’s financial woes, the view from Anchorage, the reading list and a video long in the making.

The road ahead

The first special session of 2021 is underway and conference committee on budget has been put together, clearing the table for a handful of legislators to hash out the budget while most others hang out. It sounds like the target date to be done is “Before Memorial Day” (which is also the start of the “Hey, state employees, you might get laid off because the Legislature can’t pass a budget, again” warnings) but that would mean we’d need to see significant progress in the next week. And that’s going to be a tall ask considering the Senate’s version of the budget includes the dividend, the capital budget and a very broad plan to spend federal pandemic relief money.

I don’t have a great handle on how those talks are progressing, but there’s already been a fair amount of talk about the finance committee co-chairs hashing things out so one would hope that they’ve got some of the budget nailed down.

What I wouldn’t have a heckuva lot of hope for is anything beyond the budget, like Gov. Mike Dunleavy’s proposal to constitutionalize the PFD, getting traction over the special session. That, legislative leadership says, needs to be part of a bigger discussion about the state’s finances… not to mention that I think there would be a revolt if legislators were forced to stick around in session much longer. I’m told the Senate’s race to get the budget done on Wednesday night had less to do with getting something passed by the end of the 121-day session and more to do with a load of absences the Senate would have starting on Thursday.

To me, it’s as understandable as it is frustrating. Session is a grueling and frequently miserable ordeal that’s grueling and frequently miserable thanks to the Legislature. Something seriously needs to change with this inevitable tendency to blow past the 121-day session limit.

Anyways, the end of the special session also largely marks the end of the road for any non-budget legislation that was alive during the regular session. Without a change of heart on the governor’s part, the Legislature will be unable to advance any legislation that’s beyond the session call. That means legislation like the boosted unemployment for parents or tuition assistance for essential workers has reached a dead end.

I’m told that there’s likely not to be much interest in bringing legislation into the agenda as it’d likely draw out the session, take away focus from the budget and open up some doors you probably don’t want to open. Because, after all, if one side gets to work on their bills, then everyone will want a shot. 

A turning point

Regardless of where you stand on addressing the state’s structural deficit, this week’s vote in the Senate in support of a $2,300 PFD—and the corresponding $1.5 billion draw beyond the spending limit set on the Alaska Permanent Fund—was a significant turning point in the political battle that has consumed the state for a better part of a decade. (Though whether it’s a turning point for the better or the far worse has yet to be seen.) For the first time, dividend supporters wrangled enough votes in a chamber to pay a dividend significantly above the $1,000 rate favored in recent years. Depending on where you stand, it’s breaking the seal on the easily spendable Alaska Permanent Fund earnings reserve account in a grim sign of things to come or it’s finally making good on the promise to, well, pay out big PFDs regardless of the impacts.

One way or another, though, it is the first significant step toward a resolution since the passage of the percent of market value draw plan that made the earnings of the Alaska Permanent Fund available to fund government for the first time (or, you know, that time in 2017 when the House passed a complete fiscal plan). That’s because the decision to overspend the dividend without taking steps to address the state’s structural deficit, which all but guarantees it will happen again next year, means legislators will burn through the state’s savings that much faster. In essence, the Legislature is running out of road to kick the can down.  

To some, including some legislators I’ve talked with, it represents a way to finally force some resolution on the state’s financial woes with the thinking being that as long as there’s savings to spend to avoid making the difficult and politically risky decisions those savings will be spent. There’s a $13 billion hole in the state’s constitutional budget reserve that would back up that thinking, but I’d caution that I wouldn’t be particularly confident that whatever solution created in such a dire situation would be particularly fair and equitable. 

At least conservatives have finally made some nods at talking about new revenue eventually

After years of conservatives demanding that big dividends could somehow be paid if we just “right-size” government a little more, Sen. Mike “Dozer” Shower conceded during the PFD debate that a broader financial solution is needed and pitched a proposal that calls for higher oil taxes (a minimal $200 million) and a 2.5% sales tax. Sure, that leaves a lot to be desired if we’re looking for either an equitable (as the sales tax would still leave poorer Alaskans paying a larger percentage of their income to state government than the wealthy) or even realistic solution to the state’s structural deficit—even Shower conceded his outlook requires “everything goes reasonably well” under the administration’s very, very rosy revenue outlook—but it’s still a shift.  

And, yes, a lot of this is driven by the dawning reality that the numbers just don’t support a PFD at the historical rate or inaction much longer. Almost no one is seriously talking about a PFD at the historical rate, which would be somewhere into the 70% territory of the Alaska Permanent Fund’s spending limit. Is a 50% split, which is what’s represented in the $2,300 PFD, realistic? Well, it’d leave a deficit well north of $1 billion depending on who you ask, but it seems to be the figure with enough traction to be taken seriously.

And still, at the end of the day, the $2,300 PFD and the corresponding overdraw is not settled policy. It still has to survive negotiations with the House, which is a tall order given the chamber’s generally staunch opposition to an overdraw without confidence that other measures will be passed. 

As explained above, I don’t think legislators have the political will or intestinal fortitude to work on anything other than the budget in this special session, especially when such a debate resolving the state’s financial woes would cut across many of the recent political alliances. So far, Democrats and wealthier Republicans have been largely aligned on not cutting government apart in service of paying a dividend, but the alliance has meant those wealthier Republicans have been able to essentially quash any drive for new revenue like a broad-based income tax or increased oil taxes. Now, however, there’s a growing fatigue among the Left that sees cuts to the dividend as what effectively amounts to an outsized burden being shouldered by poorer Alaskans. Whether that brings the state to resolution on the state’s financial crisis sometime in the next 18 months or simply gets us to the point where we won’t have the choice to find resolution on the state’s deficit through draconian cuts and taxes is something that will likely be decided by this Legislature. 

Or, you know, they could find a new can to kick. 

‘Presumptive incoming Mayor Dave Bronson’

Is how he was described in Acting Mayor Austin Quinn-Davidson’s news release about the city’s plan to ramp down the homeless shelter at the Sullivan Arena in case you haven’t checked in on the results from Anchorage’s mayoral run-off election recently.

The results are set to be certified at the Tuesday Anchorage Assembly meeting. 

As for that plan, the outgoing administration is taking another shot at its proposal to address the city’s homeless population by buying and transforming the old Alaska Club on Tudor in Midtown Anchorage into a housing and support center.

While on the campaign trail, Bronson pledged to sell any such buildings on day one in his administration, but Quinn-Davidson seemed to be somewhat optimistic about the route ahead. When asked why not just push ahead with the purchase before Bronson takes office, she argued that Bronson should ultimately be left to make the decision as it’s his administration that will be overseeing the city’s handling of the homeless response going forward. So…. guess we’ll see.

Reading list

And now for something completely different

This week’s end note is a two-parter. First, here’s this video that musician and inventor Martin Molin put out in 2016 of his near-magical music-playing marble machine. It’s truly a thing of wonder and one of the few videos I’ll revisit:

Since the release of that video, however, Molin has been busy working on the Marble Machine X. It’s a grown-up version of the Marble Machine that’s intended to be resilient enough to go on tour. One of his goals is to be able to play the thing without clogs or lost marbles, a tall order judging by the complete mess made by the first video. Anyways, he’s been documenting the series in weekly and daily videos that are just really a wonderful look into the creative process of building, testing and revising things while trying to balance form and function. In the last few months, that’s resulted in significant redesigns to just about everything, but particularly to the mechanism to drop the marbles. Suffice it to say, it’s driving the guy a bit mad but every step recently has been a step towards completion and this moment of the first near-final gate being finished and tested is worth sharing (also his videos are long, so I’ve queued it up to play into the best bit).

Have a nice weekend, everyone.