The fact that Alaska’s fiscal structure is not working is most likely apparent to those who created it. Two civic groups in Sitka recently had a conversation with an author for the Alaska Permanent Fund dividend, who is on a quest to make sure the state’s finances are in the right direction.
State Rep. Cliff Groh was an assistant to the state legislature at age 28 in 1982 when he worked with him to in the creation of the legislation that established the Alaska Permanent Fund Dividend. He’s worked both in and out of the federal government since then. He currently represents House District 18 in North Anchorage as a Democrat.
Groh recently came back to Sitka to catch up with old acquaintances and discuss his thoughts on Alaska’s fiscal issues with community Rotary as well as the Chamber of Commerce October. 25.
A fellow House Member Rebecca Himschoot, an Independent who represents Sitka, Petersburg, and several other communities, is as a minority member along with Groh. She noted that, in the extremely diverse caucus Groh has earned himself the title of Groh.
“The knowledge the Cliff provides to his clients, Cliff has earned him a name,” said Himschoot. “He’s the Fiscal Cliff. Therefore, we often talk concerning our fiscal situation in Alaska and he is, in fact, the Alaskan Fiscal Cliff. He’ll be sharing some of the thoughts are with us this moment – not mere thoughts, but facts and figures on where we are now and the way we got there. Some ideas on the way things could change in the future.”
Groh’s vision of the future is essentially a return to the past and the strategies that the financially ruined Territory of Alaska used to strengthen its finances and secure statehood. The Territory was dependent on revenue from mining and fishing at the time and was stricken by deficits. In 1948, the territory’s voters exiled the majority of the Legislature and brought in new members with a specific goal.
“And they were elected by the newly-elected legislators. took office during an 11-day period, they enacted five taxes in a separate session prior to the regular session which began in January of 1949.” Groh explained. “And the largest tax, by far and also the one that has the greatest impact in terms of revenue is one of the very first taxes on personal earnings that was imposed in Alaska.”
The tax on income was repealed in 1980, shortly following the construction of the pipeline that runs through Alaska. Groh claims that this was the start of the “Alaska disconnect” — the time when Alaskans started to anticipate not only a dividend checks, but an unlimited amount of government.
Groh believes that this strategy was successful for the past 35 years. However, now that oil revenues have surpassed their peak and are on declining pace, without an income tax, there’s no way to compare the Alaskan economy to the size of its population.
He contacted for the Sitka Chamber of Commerce to run a thought experiment and to imagine that Alaska’s population would double.
“What could happen to the federal programs?” Groh asked. “Well roads would “sail” and as I said, they’re awful in my area. I’m going to admit when driving around Sitka today there’s a lot of roadwork to be done in Sitka as well. The state ferries were operating much more frequently than I did when I was here for more than 15 years ago. would decrease. We’d need to increase the number of teachers and facilities for schools or risk poorer results. Our dividends get smaller. The public health and safety services like firefighters, troopers, as well as public health nurses are stretched to the limit. Actually, all of the services provided by the state would require a greater investment or their quality would be affected. Let’s look at what happens to the revenue of state in the event that the population doubled. It’s about the same as currently. We must be aware of this.”
Ten years ago Groh’s may be a lonely vocal voice out in wilderness however, Alaska has since squandered millions of dollars in savings. Although the principal of the Permanent Fund Permanent Fund itself can’t be changed, a different account known as the earnings reserve is able to be redeemed with one vote from the Legislature and, in the end, Alaska could have no operating cash in the first place. Now, many of Groh’s fellow lawmakers are also discussing about taxes. A sales tax for the state as well as an income tax, or both.
Groh is the author of HB 56 which will introduce an income tax of 2% however, only on earnings of more than $200,000. If you earn less than $200,000, you could simply “chip-in” 20 dollars.
He’s not interested in the idea of a sales tax.
“Some other lawmakers favor the idea of a sales tax. one was enacted in the last year” Groh explained. “It was a general sales tax. Then I said”Folks, before we begin taxing food items or feminine goods, I’d prefer to start by taxing millionaires first.”
A chamber member asked to decide if Permanent Fund dividends should be eliminated, Groh responded that the idea was not his. He didn’t believe it could solve issues with the Alaska Disconnect, although he was in favor of restructuring the dividend and securing the fund by introducing an amendment to the Constitution. Groh also didn’t endorse a policy employed by a variety of governments which includes the federal government, which is to spend deficits.
“We cannot borrow to get out of this mess,” Groh said.
