Upheaval

If you haven’t noticed, the state of Alaska is experiencing an upheaval. Upheaval’s probably not the right word, since it denotes change or disruption that is “sudden.” There’s nothing sudden about what we’re experiencing, I blogged about the warning signs nearly three years ago. Since then the state legislature and former governor effectively twiddled their thumbs while the State’s coffers were drained. What’s the cause of the upheaval? Very simply the state has run out of money to pay for its obligations.

Well, sort of.

You see, we don’t have a state income tax in Alaska. We also don’t have a state sales tax. The State’s primary source of revenue is taxes, fees, royalties etc. on the oil and gas companies who produce the oil and send it to market. That accounts for about 85% of the state’s revenue. The rest of its revenue comes from federal funding, taxes and fees on other smaller industries (tourism, fishing, retail, etc), and the interest on a Big Pot of Money (keep reading). When times were good – when a barrel of oil went for $100 or more – there were no worries. That’s because the amount of money flowing into state coffers is (roughly) proportional to the price of a barrel of oil. Unfortunately, for the state of Alaska, the party came to a sudden end around 2014. The price for a barrel of Alaska crude dropped faster than a dress on prom night. Since then the hangover in Juneau has grown increasingly unpleasant

But wait. Doesn’t Alaska have this thing called the Permanent Fund (PF) now valued at over 60 Billion dollars? Why doesn’t the government just make a withdrawal from that fund to make up for the budgetary shortfall? Sounds good except 1) the fund’s principal is constitutionally protected, and 2) the fund’s annual earnings, while legally available to pay for government obligations, have been used (since 1980) to pay each and every eligible Alaskan an annual dividend. Last year our dividend was $1200.00. Multiplied by the number of eligible Alaskans, that equals one Billion dollars. That’s one Billion dollars not available to the government to use to pay for its obligations.

Wait a minute, can’t the governor and/or legislature just pass a law that suspends or reduces the amount of the dividend so there’s more to use to pay for government obligations? In fact, that happened last year. That $1200 we all got, it was supposed to be much larger but the former governor, by executive veto, reduced it so more of the earnings reserve could be used to pay for government obligations. Of course that pissed off a lot of Alaskans who have grown fond of free money* over the past forty years, but the state supreme court concluded he could legally do it.

Fast forward to our current governor, a republican duly elected by ThePeople® of the great state of Alaska. He was one of the Alaskans pissed off by the former governor’s veto. Resolved to right a wrong, he promised to return the calculation of the dividend to the old formula based in law. He won by a wide margin. Had the old formula been used in 2018, instead of $1200, each of us would have gotten over $2000 (or something like that). Not only did the new governor want to restore the old formula going forward, he also proposed more money be added to our 2019 dividend to make up for the difference between the $1200 we got, and what we would have got under the old formula. Ok, so how much is that you ask?

Wait for it…. $3000 $6700! Update: $3000 is the estimate of the 2019 dividend under the old formula. Adding in the 2018 makeup would raise it to an eye-popping $6700.

So, you’re thinking, let me get this straight – no state income tax, no state sales tax, oil revenue has tanked. The only source of revenue left for the government to use to pay for its obligations is the earnings reserve of this thing called the Permanent Fund. And yet the governor wants to use that to pay a 2019 dividend of $3000 (maybe even $6700!!) to each and every eligible Alaskan (~$3 Billion), and thus reduce how much is available to pay for government obligations?!

That’s correct.

Call me callous for ignoring marginal utility, for taking a devil-may-care attitude, but Happy Wife and I see no reason to overact to the current upheaval and institute an austerity program of our own. If the governor insists on sending us $6000 in October, what else is there to say except, Cheers.

* One could quibble that the annual dividend is not really “free money,” since by law Alaska is an owner state, which, among other things, has been interpreted to mean the citizens of Alaska have an ownership right in the natural resources (e.g. oil), and as such should be expected to demand a dividend on the value of their asset.

Baked Alaska, Etc.

It’s been Hot in Alaska. So Hot in Anchorage Happy Wife hasn’t slept with me in our bed in must be a couple weeks now, preferring the couch downstairs next to a small fan she placed in front of an open window to pull in the cooler evening air. The Dog seems to prefer sleeping down there as well. In Anchorage we broke an all time high temperature record last week – 90°! Remarkable, yes, but the really remarkable thing is how long this super high pressure block has hung around, easily two weeks, maybe a little longer. And not a drop of rain. Not even a slight chance of rain, just lots of smoke from all the wildfires burning to the north and south of us. As I write the high pressure front has moved north, blessedly, leaving us with more average summertime temperatures.

A few weeks ago while kayaking with her friends (aka The Merry Mermaids) I get a frantic call from Happy Wife, the diamond on her wedding ring was gone. The metal prongs holding the solitaire in place had sheared off right where it was attached to the ring. She first noticed it was gone while chilling with the Mermaids in the cabin,  after they’d schlepped kayaks and gear from the water taxi onto the beach. Unfortunately, by now the tide was high and the beach was under water. Desperate nonetheless, she and the Mermaids searched everywhere; they scoured the beach, thoroughly checked their gear and clothing, even searched inside the kayak hulls, nadda. I recalled what the diamond had cost. I did my best to console her over the phone, surely our homeowners policy would cover the loss, no? Another day passes. HW paddles her kayak somewhere out in the bay where there’s cell phone service. She calls me back. She’s still despondent. Again I try to reassure her, we’ll get you a new diamond dear. Important as it is it’s just a material thing, it’s what it means that matters. Nothing can take that away from us. We kiss over the phone and I hang up. Minutes later my phone rings again, it’s HW. Already I’m thinking, can it be? I pick up: “I FOUND IT!” She and the Mermaids had taken a break from paddling, on a beach or a shoal or something, waiting for the tide to swing. As she sponge-bailed water from the hull of her kayak she felt something hard and wondered how the heck a “stone” had gotten inside. And there it was, the whole time, rolling around back there even though it had escaped her notice the day before. Happy ending. Happy wife.