By GARLAND KENNEDY
Sentinel Staff Writer
With the price of Alaskan oil tumbling, the state faces a difficult fiscal scenario, says Rep. Jonathan Kreiss-Tomkins.
In an interview with the Sentinel last week the Sitka legislator observed that Alaska “has never had a diversified fiscal foundation and has lived and died by the price of oil for its budget. So as oil goes down… even if it just stays there for a little bit, that amounts to tens of millions or even hundreds of millions of lost revenue.”
Rep. Jonathan Kreiss-Tomkins (Sentinel File Photo)
The State Department of Revenue said the peak price of North Slope oil so far this year was $70 a barrel in early January. As of Thursday it was $16.33.
Earlier this month, as the full impact of the coronavirus-related recession became apparent, Gov. Dunleavy signed a number of line item budget vetoes in an attempt to reduce spending.
The governor’s vetoes came with assurances that federal money from the CARES (Coronavirus Aid, Relief and Economic Security) Act would supplement shortfalls.
“The governor has asserted that he can use this federal CARES Act money to backfill the line item vetoes he made. The problem is that there is no legal justification for doing that,” Kreiss-Tomkins said. “I’m not optimistic that it is actually going to be lawful, in which case all of those vetoes are going to hit these various basic services in a big way.”
The governor’s vetoes have cost the Sitka School District $276,000 in state funding.
The School Board was told at Thursday’s meeting that the district will receive $225,000 in CARES Act funding, but that it can be used only for COVID-related expenses. This means that basic costs such as payroll are not a legal use of the money.
“You can only use it (CARES Act money) for COVID-related expenses, and that is why it has to go in a separate account,” Sitka District Superintendent Mary Wegner said Friday. These uses will include expenses such as food service and transport as the district continues the discounted lunch program during the school shutdown.
On a statewide level, Kreiss-Tomkins said, “when your back is against the wall, it’s almost too late to make the decisions that would have prevented you from having your back against the wall.”
The challenge now, he said, is to protect the Permanent Fund “before there is temptation to drain the Permanent Fund, to expediently pay for short term needs, which are very real. But it’s the most short-sighted thing to spend a $60 billion fund because you can’t balance your own budget.”
The Permanent Fund is divided into two categories: the Principal and the Earnings Reserve. The former cannot be drawn down or spent, but the latter is available for appropriation by a vote of the Legislature.
Kreiss-Tomkins reaffirmed his support for a broad base tax as well.
“I voted for income tax three years ago, and I think it’s pretty clear that was the right decision. The state would be more diversified in terms of its ability to support services and muster its response to this disaster, and we would have more savings in the bank,” he said.
