Reality Check w/ John Tracy: Why the fiscal gap should be fixed now
Back in October, when I first began these commentaries, I said that lawmakers would be unlikely to levy an income tax, or use earnings from the Permanent Fund to help balance the budget.
It didn’t take much of a crystal ball to make that prediction going into an election year, even though it was possible that oil prices might rebound.
Here we are six months later and the budget deficit is even deeper now at $4 billion.
Lawmakers know we will have to restructure the Permanent Fund and use a portion of its earnings to fund state government. The only question is when.
There are some who want to hold off on any plan for another year and pay for this year¹s deficit out of our savings — the Constitutional Budget Reserve.
Others say the state needs a plan this session before we blow through half of our savings.
So, should we wait or fix it now?
The fact is that in 9 months the problem won’t have changed, nor will the solutions.
I have 200 million reasons why the smart money is on a plan this year.
The $4 billion that some want to spend out of our savings would generate about $200 million a year in interest every year if we keep it invested. That’s based upon a 5 percent rate of return.
That’s the same amount of money that a proposed income tax would raise.
Think about that for just a minute. Where is the wisdom in eliminating $200 million a year in interest, only to turn around and ask Alaskans to raise another $200 million in an income tax?
The public isn’t paying any attention to this because our only interest appears to be in protecting the dividend.
But understand this; once our savings accounts are gone, which could be this time next year, the dividend will be gone, too. Because the only place lawmakers will be able to turn for money is Permanent Fund earnings and taxes.
There are fiscal plans on the table, but some running for re-election apparently believe they’ll stand a better chance of keeping their jobs by doing nothing instead of something.
Unfortunately for them, and for us, we’re running out of road.
John’s opinions are his own, and not necessarily those of Denali Media or its employees.
The post Reality Check w/ John Tracy: Why the fiscal gap should be fixed now appeared first on KTVA 11.