Brennan: Keep your fingers crossed

Alaska has reached a crossroads in its economic development and there is no clear direction on which path to take.

Our state government and its various programs are too expensive to fund with our current revenue sources. And some of the options being proposed, like increasing oil taxes, would most likely reduce our circumstances by deterring much-needed investment.

One thing seems clear to me, that the traditional formula for calculating Permanent Fund dividend checks, needs to go. If the old formula is followed, the payments would worsen our problem by squeezing vulnerable people and essential services to the point where we would almost certainly have to bring back the state income tax.

An income tax, and/or a sales tax, may be part of our future eventually but the longer we can put those off the better off we will be. I don’t have the economic horsepower to prove that argument, but I know in my bones that we should delay those as long as we can. The problem is that if things don’t change, the need for such taxes will become painfully obvious.

Gov. Mike Dunleavy says there will be another special session of the Legislature sometime within the next few months. And perhaps that is inevitable. The important thing will be that the public and its leaders tighten down their thinking caps and make sure that whatever comes from that session makes things better and not worse.

Hopefully, our governor will give up on his quixotic battle for a $3,000 dividend. As nice as it would be to get such a check, it could only come at the expense of government responsibilities that bring pain to our people when they are unmet. The people of Alaska are accustomed to getting their checks in October and those will go out, but unless Dunleavy or our legislators pull off some magical feat the checks are likely to be $1,600, some $1,400 less than the governor’s target amount.

Many people who live along the Alaska Marine Highway System are going to need those checks and more to cover the increase in their living costs caused by the shutdown in ferry service for much of the winter. That will require a lot of goods that normally arrive by sea to be transported by air — at a considerable boost in cost.

If we tried to increase oil taxes we would be reviving a self-defeating practice that has been attempted often in the past. We would, in effect, be saying to our most important business partners: “Stick em up.” Generally our state decision-makers have realized how foolish the approach is and corrected the errors; sometimes sooner, sometimes later.

If the state dividend checks are held down, that could hopefully free up enough money from the Permanent Fund Earnings Reserve Account to meet state obligations. And dealing with the state’s cash-flow problems effectively could demonstrate to prospective investors that Alaska can and will act responsibly even when under financial pressure.

Attracting new investors and encouraging new investments by our existing employers and revenue-generators are the only sensible solution to our financial problems. Companies like Hilcorp and ConocoPhillips have track records in Alaska and may be our best hope for the future. They are looking at sizable investments that will generate jobs and new revenues, both government and private.

Let’s hope our state leaders keep their cool, make sound decisions and keep Alaska headed down the road to a solid economic future.

It’s in their hands and the need for good decisions seems greater now than it has been for many years.