Reader: Murkowski win could jeopardize PFDs

A Spectrum, by John Robertson

Steve Frank in a recent Spectrum piece obscured the fact that gubernatorial hopeful Frank Murkowski's vague budget proposals only balance by drawing very substantially from permanent fund earnings. Indeed, I fear that both Steve Frank and Frank Murkowski's public comments on the state budget clearly indicate an intent to curtail drastically, and perhaps eliminate entirely, the PFD. It seems that they would rather eliminate the dividend than impose a temporary income tax.

My wife, young son and I are typical, middle-class Alaskans who will receive thousands of dollars more in future PFD payments than we will ever pay in any state taxes. But this statement is true only if a Murkowski administration does not seize the PFD to protect the few Alaskans who would pay more in income tax than they would receive in dividends.

Consider these facts:

The state of Alaska is projected to have a $1-billion budget deficit in three years.

The state is required to have a balanced budget.

Two-thirds of the state's $7.2-billion budget is either disbursements of federal pass-through money or similar disbursements that do not contribute to the projected deficit, or it is paid out as PFDs and used to inflation-proof the fund.

There is not nearly enough fat in the remaining $2.4-billion operating budget to close the projected $1-billion fiscal gap.

Now consider what Steve Frank says about how a Murkowski administration would seek to close the fiscal gap:

Murkowski would reduce unnecessary spending.

He would increase revenue through resource development.

No doubt with an eye to the public-employee vote, Murkowski has publicly stated that he will not balance the budget on the backs of state workers. In other words, no cuts in state spending that significantly reduce the size of the state bureaucracy.

What is the only significant part of the budget Murkowski can cut without substantially reducing the number of state workers? The PFD.

Furthermore, we cannot possibly increase our rate of resource development quickly enough to close a billion-dollar budget gap in just three short years. While we should all be optimistic about Alaskan's economic future, we must refrain from grandiose hallucinations about how BP, Phillips or any large timber or mining interests are going to rescue us from our own lack of courage. Eventually, resource development will result in an increase in state revenue, but Murkowski has utterly failed to provide us with a realistic way to bridge the revenue gap until such future development begins to contribute to the budget.

Of course, a temporary income tax would protect the PFD until revenue from new oil and gas leases and various severance taxes would be available. But again, Steve Frank states that Murkowski is opposed to such a tax. Gov. Tony Knowles has proposed a state income tax that would be one-fifth of someone's federal income tax. If a family of three receives a total of $4,500 in PFD money, this family would have to owe the federal government $22,501 just in income tax before the state tax bill exceeded the family's PFD money. How many of us paid $22,501 in federal income tax last year? Do not include social security or Medicare/Medicaid taxes in your federal income tax total.

While Steve Frank notes the possible negative economic consequences of an income tax, he totally ignores the negative consequences of an elimination or curtailment of the PFD. Are you in any line of work that sees an increase in demand at PFD time? Well if Murkowski wins the next election, you had better start looking for another job. You might not have your current one for long. And you probably won't have much of your PFD either.

John Robertson is a resident of the Talkeetna Mountains near Sutton.