The FY 2019 budget isn't sustainable even in the most basic sense. It continues to rely on draws from the Constitutional Budget Reserve in order to balance. Revenues don't equal spending in this or any other projected year.
But as we have long explained, whether or not a government budget is "sustainable" in the full sense of the term is about more than simply whether long term revenues equal long term spending. In the words of Section 1.2 of the Constitution, to be considered sustainable a budget must also be designed for "the good of the people as a whole."
In short, a government budget can't be considered fully "sustainable" if it undercuts the overall economy or benefits some Alaskans at the expense of others. While such an approach may benefit -- sustain -- some segments, to be fully "sustainable" fiscal policy needs to both adequately fund government and also serve to sustain the overall economy and individual citizens "as a whole."
It is that second role where the FY 2019 budget fails the most. As ISER consistently has advised, cutting the PFD -- the foundation of the FY 2019 budget -- has the "largest adverse impact" on the overall economy and is "by far the costliest measure for Alaska families" of any of the various new revenue options.
While that approach may help some segments of the economy -- particularly those portions tied to government spending and those in the Top 20% income bracket, who avoid paying a proportionate share of the cost of government by using PFD cuts as the primary public funding mechanism -- it fails miserably in meeting the test of sustaining the overall economy and individual citizens "as a whole."
As Jay Hammond made clear, "...under Alaska’s Constitution, [Alaska's resource income] and the resources it comes from, belong to all Alaskans; not to government nor to a few ‘J.R. Ewings’ .... Alaska’s founding fathers wanted every citizen to have a piece of the action.”
Diverting to government a portion of the income set aside to provide "every citizen with a piece of the action" so that those tied to the government economy and the Top 20% -- Alaska's version of the 'J.R. Ewings' -- are better off, but at the expense of the overall economy and the Other 80%, does not meet the Constitutional objective of acting for "the good of the people as a whole."
There are ways that do so. By applying to all Alaskans the same, proportionate assessment to cover the cost of government, a broad based flat tax would treat all Alaskans the same -- "as a whole."
By raising a portion of the revenue from non-residents receiving Alaska income and spreading the remainder out across a broad base, a broad based flat tax also would minimize the burden on individual Alaskans, and thus the effect on the overall economy.
The FY 2019 budget does neither of those, however, and in doing so fails the test of sustainability.
Governor Walker's -- and others -- claims that it does is simply a shameless attempt to co-opt a phrase made popular by others for his own political purposes. It fails the fact check, however.
