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Alaska’s uphill battle to right its economy in 2021

There’s just more than a month until the Legislature returns to session in 2021, and nearly every issue that plagued lawmakers in 2020 looks likely to be the same or worse. The partisan rifts are deeper. The state’s budget situation is more dire. The COVID-19 pandemic is raging on, with grave impacts to both public health and Alaska’s economy. And, as in the last Legislature, the challenge of organizing majority caucuses in the House and Senate looks daunting. On top of that, Gov. Mike Dunleavy’s budget would set a scary, shortsighted precedent.

The Legislature, same as it ever was

Although the Alaska GOP effectively split into two different parties in August’s primary election, the overall effect this had on the number of seats the major parties held in the Legislature after the general election was surprisingly muted. As in 2019, the House is effectively split down the middle between Republicans and Democrats — and the allied independents who plan to caucus with the Democrats. Republican Rep. Louise Stutes of Kodiak, citing concern for ferry funding, said she plans to join the Democratic/independent caucus, making for a dead even 20-20 split.

The 20 other House Republicans are, for now, hanging together. But it’s easy to see how the fracture within the party that blew open in August could doom their chances at forming a majority. An uncompromising full-Permanent Fund dividend faction, made up mostly of Mat-Su area and Kenai Peninsula legislators, purports that Alaska’s budget deficit of a billion-plus dollars per year can be closed through cuts while the state continues to pay a full PFD. This is plainly false to anyone with even a rudimentary sense of Alaska’s budget, but they come to Juneau with the strident support of their constituents, and the past two years have shown that they’re exceedingly unlikely to support any budget vision other than their own. More moderate Republicans, such as Fairbanks Reps. Bart LeBon and Steve Thompson, are once again in the difficult position of trying to herd cats within their own party or joining a coalition that doesn’t entirely share their values. The latter is the likely outcome.

And it’s clear the hardline GOP contingent doesn’t plan on taking a backseat in whatever caucus they form. In fact, several members are already throwing red meat to their voting base. A week ago, they signed on with Texas’ ill-conceived lawsuit that attempted to overturn the presidential election result by claiming widespread electoral fraud in — conveniently — several of the swing states that president-elect Joe Biden won, and none of those that Donald Trump did. It remains unclear how Reps. David Eastman, Ron Gillham, Chris Kurka, Kevin McCabe, Tom McCay and George Rauscher, as well as Sen. Lora Reinbold, squared their purported small-government, pro-states’ rights talk with their support for an effort by one state to overturn election results in another. The action was unprecedented, unfounded and dangerous to democracy. And it was an excellent illustration of just how far the Legislature’s hardliners are willing to go in service of partisan ends.

The Senate, too, may see some sort of bipartisan coalition formed, but it’s not clear how many Democrats such a caucus would need — or how many its presumably Republican leadership would be able to abide. Complicating matters further, an FBI investigation into allegations of senators trading votes for campaign funding could shake up the structure of the body if there is substance to the charges.

No time to waste

However legislators decide to organize, they need to get it done quickly — before the session starts, if possible — and do so in a way that enables them to tackle the major issues facing Alaska in 2021. Our state has been pummeled by COVID-19 and will continue to be for months. Our economy is in scary shape and won’t return to anything approaching normal until late spring or summer. State revenues remain scarce, and a budget fix is sorely needed before our savings run completely dry. We can’t afford a legislative stalemate, and we desperately need some statesmanship.

And there’s another approach we can’t afford: Gov. Dunleavy’s plan to withdraw a massive $6.2 billion from the Permanent Fund to pay super-sized dividends. For a governor who has prided himself on following the law related to PFD matters, it’s a shocking affront to a 2018 statute limiting draws from Permanent Fund earnings and an abdication of fiscal responsibility. The problem Gov. Dunleavy plans to combat with the cartoonish checks is real — many Alaskans are hurting financially because of the pandemic. But this proposal is just a re-hash of his pre-pandemic PFD-at-any-cost philosophy. The economic scarring we’ve felt from COVID-19 hasn’t changed the fact that this idea, at its core, is a bad one.

Gov. Dunleavy insisted in his budget rollout, “I want people to understand this is not going to be a situation where my administration is going to go into the earnings reserve of the Permanent Fund on a regular basis.” There’s no doubt he means what he says, at least right now. But every year — and it won’t take many — raiding the Permanent Fund to ease today’s woes will become easier and easier, until it’s gone.

Regardless of its short-term focus, the governor’s budget approach will add another layer of complexity to the Legislature in 2021, as quite a few legislators will champion the chief executive’s approach, regardless of the fact that it alters the PFD calculation or raids the Permanent Fund to an unsustainable degree. Alaskans should encourage their representatives in the Legislature to instead make the harder choice to hammer out a balanced budget vision that won’t have Alaska draining its savings until we inevitably hit rock bottom. That would require legislators to actually listen to one another and compromise. Given their past behavior, maybe that’s unlikely, but if they want to build a bridge to a better tomorrow, it’s the least they can do.

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