Monday the Fiscal Policy Working Group, which I was a member of, released recommendations for the legislature to consider. The final report can be found HERE.
The working group recognized the need for a comprehensive solution, versus separate piece-meal solutions, as necessary to address both fiscal and political challenges.
I believe we have a small window of opportunity to accomplish systemic change. Our current fiscal situation is better than we projected. The price of oil is up, large amounts of Covid-related federal dollars are flowing into the state, and permanent fund investments have experienced record returns. Now is the time to act before economic conditions change and before the cyclical election season begins.
It is my hope that these recommendations will serve as a starting point for a comprehensive solution to be enacted by the legislature during this special session.
Work group recommendations on any single provision should be understood as an agreement within the context of a comprehensive solution and not an agreement on any one provision in the absence of a comprehensive solution.
Here are the highlights of some of the key recommendations:
The working group unanimously believes constitutional certainty is needed to resolve the PFD question. The FPWG unanimously recommends considering two approaches:
· A constitutional amendment that requires the PFD to be paid “as provided by law,” leaving the formula in statute, and effectively constitutionally guaranteeing the statutory formula.
· A constitutional amendment that constitutionalizes the PFD formula itself.
The FPWG unanimously recommends that revising Alaska’s spending limits be part of a comprehensive solution.
The FPWG recommends the legislature consider budget reductions below the FY23 baseline ($4.503 billion), and work towards reductions in the $25-$200 million range over multiple years.
The FPWG recommends the legislature consider additional annual revenues, working towards revenues on the order of $500-$775 million, as a part of a comprehensive solution.
The FPWG recommends that any comprehensive solution assume $210 million in capital budget spending — $150M to match federal funding, supplemented by $60M, which approximates 1% of the value of State of Alaska assets.
The FPWG unanimously believes one-time fiscal measures will be necessary as a part of a comprehensive solution, while other parts of the solution take full effect. Two different one-time fiscal measures were discussed:
· One-time transfer (in excess of the annual POMV draw) from the Permanent Fund’s Earnings Reserve Account to the Constitutional or Statutory Budget Reserve, to “bridge” budget deficits through the first few fiscal years after adoption of a comprehensive solution.
· A PFD “stairstep” that starts with a more modest PFD and steps up to the full PFD amount as provided under the new POMV-based PFD formula through the first few fiscal years after adoption of a comprehensive solution.
I hope you take the time to review all of the working group’s recommendations and please provide me with your feedback.