Alaska's fiscal and economic doomsday clock moved significantly closer to midnight yesterday.

As of the end of January, the Permanent Fund Corporation's Earnings Reserve Account (ERA) held $7.3 billion in accumulated realized earnings. However, during amendments yesterday, the members of the Alaska House Majority Coalition on the House Finance Committee (HFIN) (including I's Representative Jason Grenn and Rep Dan Ortiz) voted to transfer $3.3 billion of that to the general fund, $794 million to the dividend fund (to fund the reduced FY 2018 PFD under their plan) and then, interestingly, another $120 million back to the principal of the PF. See https://goo.gl/Lp6KLq at p. 16 of the packet.

In short, in one fell swoop the members voted to drain more than half the current realized balance out of the state's largest remaining savings account (ERA), moving most of it into the general (UGF & DGF) fund for further spending.

Other than the portion going to the (reduced) PFD, the maneuvers were not otherwise required because the Constitutional Budget Reserve holds more than enough to cover this year's deficit. The effect, however? To reduce the "amount available for appropriation" within the meaning of Art. 9, Sec. 17(b) of the Constitution (https://goo.gl/t7XUFx), such that the 3/4 vote otherwise required under subsection (c) to tap into the Constitutional Budget Fund for an even greater draw on savings in the future is no longer required. In essence, it has the effect of freezing the Alaska House Republicans, who have been arguing generally for steeper cuts to ongoing spending and whose votes otherwise would be required to reach the 3/4 threshold, out of the decision making process.

The irony -- or hypocrisy, depending on how you view it -- of the maneuvers? In effect, they are largely the equivalent of those proposed by the then-House leadership in 2015, which led to the formation and letter from the self-titled "MuskOx Coalition." https://goo.gl/vkHWPy

The Coalition's then-response? "We feel that resorting to Permanent Fund earnings so suddenly ... will sow grave confusion and mistrust among Alaskans. Furthermore, we strongly believe that major actions having to do with the Permanent Fund, such as this, should go before the voters." Two signatories to that letter? Now HFIN Co-Chairs Paul Seaton and Neal Foster. The person offering the amendment yesterday? Paul Seaton. The times going "before the voters" was mentioned in offering the amendment, or by the two Co-Chairs before voting for it? None.

The times Independent and self-styled fiscal conservatives Jason Grenn and Dan Ortiz objected to it? Also none.

As we have discussed repeatedly on this page, combined with reducing spending to long-term sustainable levels and implementing Hammond 50/50 we believe that the state has enough in savings to see us through the current lows in the oil price cycle without resorting to economically damaging PFD cuts or other taxes. If ultimately passed by the legislature, however, yesterday's deep raid on the ERA will significantly change that calculus, as we said above moving Alaska's fiscal and economic doomsday clock significantly closer to midnight.

Over the course of Thursday, Friday and Saturday HFIN will be taking public testimony on their proposed Operating Budget (see https://goo.gl/NMSEdx for times and means). We intend to send in testimony explaining the need to make further spending cuts down to long term sustainable levels and arguing for them to reverse the proposed raid on the ERA adopted in yesterday's amendments.

We hope that you do as well. The email address is housefinance@akleg.gov. 
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