Comments filed on behalf of Alaskans for Sustainable Budgets on HFIN CS for HB69, the House Finance Committee's proposed committee substitute for HB69, the Governor's proposed operating budget.

1. 4/25/2021 Gmail - Comments on HFIN CS for HB69 (Work Draft Presented 4.23.2021)
https://mail.google.com/mail/u/0?ik=d8f123d76e&view=pt&search=all&permthid=thread-a%3Ar1240318590038699332&simpl=msg-a%3Ar119570152… 1/2
Brad Keithley <bgkeithley@gmail.com>
Comments on HFIN CS for HB69 (Work Draft Presented 4.23.2021)
1 message
Brad Keithley <bgkeithley@gmail.com> Sun, Apr 25, 2021 at 9:08 AM
To: House.Finance@akleg.gov
On behalf of the Alaskans for Sustainable Budgets project, this is to provide comments on proposed CS for HB69 (Work
Draft Presented 4.23.2021) (Draft HFIN CS).
Under AS 37.13.145(b), at the end of each fiscal year the Permanent Fund Corporation (PFC) is to transfer from the
earnings reserve account to the dividend fund established under AS 43.23.045, 50 percent of the income available for
distribution under AS 37.13.140. According to the PFC's most recent projections, the applicable amount determined
under AS 37.13.145(b) for FY22 is $2.042 billion.
Rather than the amount required for that transfer, the Draft HFIN CS appears instead to reserve fiscal space only for the
transfer of $175 million (approximately 8% of the amount contemplated by AS 37.13.145(b)). See "Alaska House’s draft
plan for federal aid calls for millions to help nonprofits, local governments and tourism," Anchorage Daily News (Apr. 24,
2021) ("By substituting federal money for tax dollars in various places within the state budget, the plan frees about $230
million for infrastructure spending and $175 million for possible use in a Permanent Fund dividend.")
The remaining $1.867 billion in revenue required by AS 37.13.145(b) to be transferred ("shall transfer") to the dividend
appears instead to be diverted to (some prefer to refer to it as "retained in") the general fund to support other
appropriations.
We believe the Committee should amend the Draft HFIN CS substantially to increase the amount of fiscal space reserved
for the Permanent Fund dividend (PFD). Consistent with the Governor's 10-year fiscal plan, we believe the Committee
should instead strive to reserve space closer to $1.53 billion (50% of the FY22 POMV draw).
According to a 2016 study by the University of Alaska-Anchorage's Institute of Social and Economic Research (ISER),
using reductions in the PFD as a source of general fund revenue "has the largest adverse impact on the economy"
of all of the potential revenue sources studied in the report. ISER, "Short-Run Economic Impacts of Alaska Fiscal
Options" (March 2016) at A-15 (PFD cuts also have the largest adverse impact on income of all of the options, including
spending reductions). According to a 2017 ISER study, using PFD reductions also are "by far the costliest measure
for Alaska families." ISER, "How Much Might Closing the State Budget Gap Cost Alaska Families?" (Feb. 2017) at 1.
As is clear from a 2017 study by the Institute for Taxation and Economic Policy (ITEP), using PFD reductions to fund
government also has a substantially regressive effect, shifting the burden of funding (as a percent of income) largely
to mid- and lower-income Alaska families, with upper income families comparatively contributing only a trivial amount
(and non-residents, none). ITEP, "Comparing the Distributional Impact of Revenue Options in Alaska" (Apr. 2017).
Especially in these times, the Committee should strive to avoid using the fiscal tool that has the "largest
adverse impact on the [Alaska] economy," is "by far the costliest measure to Alaska families," and so
heavily tilts the revenue burden against mid- and lower-income Alaska families.
Over the intermediate and longer term the legislature should develop substitute, broad-based revenue options that have
far lower adverse impacts on the Alaska economy and families, especially mid- and lower-income Alaska families. An
excellent alternative in that regard is analyzed in a December 2020 ITEP study. ITEP, "Comparing Flat-Rate Income Tax
Options for Alaska" (Dec. 2020).
In the immediate term, however, the Committee should reduce such adverse impacts by reducing the amount of federal
American Relief Plan (ARP) funds appropriated to other uses, instead increasing the amount used to backfill unrestricted
general fund (UGF) spending, expanding the fiscal space available for the PFD.
Currently, the Draft HFIN CS directs to backfilling UGF only $175 million (25%) of the approximately $700 million in ARP
funds appropriated in the bill. We believe the amount used for backfilling UGF should be increased instead at least to

2. 4/25/2021 Gmail - Comments on HFIN CS for HB69 (Work Draft Presented 4.23.2021)
https://mail.google.com/mail/u/0?ik=d8f123d76e&view=pt&search=all&permthid=thread-a%3Ar1240318590038699332&simpl=msg-a%3Ar119570152… 2/2
85% of the $700 million in ARP funds appropriated in the bill, reducing the other uses proportionately to create the
necessary space or alternatively, funding them with other, lower impact, less regressive revenue measures. (Using 85%
to backfill UGF spending creates fiscal space for a PFD roughly equal to 20% of the FY22 POMV draw.)
We appreciate some may argue that the other proposed uses of the ARP funds are important to the Alaska economy. If
they are, ALL Alaska families, particularly including those in the higher income brackets should contribute equitably to
the costs, rather than shifting the burden through PFD cuts mostly to mid- and lower-income Alaska families, many of
whom themselves are on the lower leg of the current, "K-shaped" economy.
If those in the higher income brackets resist paying an equitable share of the costs, perhaps the spending may not be as
important as some think (some view that as a "market based" test of the spending). Regardless, mid- and lower-income
Alaska families shouldn't be required to contribute disproportionately to such spending. As a result, we urge that the
Committee reduce the heavy reliance on PFD cuts to fund government used in the Draft HFIN CS by increasing the
amount of fiscal space retained for the PFD.
Thank you for the opportunity to submit these comments.
Brad
Brad Keithley
Managing Director, Alaskans for Sustainable Budgets
Cell/Txt: 214-675-0038
Links: linktr.ee/bgkeithley
Mail: 645 G Street, Suite 100, No 796, Anchorage, Alaska 99501
Web: AKforSB.com