Alaska Governor Sued Over Cuts to Oil Subsidy Checks

Published October 17, 2016

An Alaska legislator is suing Gov. Bill Walker (I) for his decision to cut the state’s oil subsidy entitlement program.

In July, Walker reduced the state’s Permanent Fund Dividend (PFD) payments from $2,072 to $1,022 per resident, to reduce government spending to help close a $4.1 billion budget gap.

Alaska’s PFD program is an annual entitlement program distributing government money to residents. It is funded by taxes paid by energy companies that do business in the state.

Alaska state Sen. Bill Wielechowski (D-Anchorage) sued Walker in September, arguing Walker lacks the legal authority to alter the PFD payments. In October, Walker issued a press release calling on the judge to issue a summary judgement in his favor.

Cold Cash Payouts

David Boyle, executive director of the Alaska Policy Forum, says the state government exchanges taxpayers’ property rights for yearly government handouts.

“For the most part, Alaskans do not own the mineral rights on their property; the state does,” Boyle said. “In return for not owning the mineral rights, Alaskans receive a portion of the profits the state receives from oil royalties, which is put into the Permanent Fund, which invests in a totally diversified portfolio. Face it: Alaska is a socialist state, due to [its] socialist constitution.”

Less Bang for More Bucks

Boyle says the Alaska state government has become more expensive and less effective, putting greater strain on the state’s fiscal situation.

“The governor opted to expand Medicaid on his own, and now we have a program costing $30 million more than his department projected,” Boyle said. “We now have more state employees per capita than any other state. We also rank third in K–12 spending, at about $22,000 per student, and we get a lousy return on that investment, ranking 49th out of 51 in 4th grade reading.”

‘Extremely Difficult Fiscal Situation’

Jonathan Williams, vice president of the American Legislative Exchange Council’s Center for State Fiscal Reform, says economic factors and increasing government spending are squeezing the state’s budget.

“The dramatic decline in oil prices, combined with an unrealistic growth of state spending, has put Alaska in an extremely difficult fiscal situation,” Williams said. 

Williams says Alaskan lawmakers should solve the budget problem by cutting spending.

New taxes are not the answer,” Williams said. “The best approach to protect hard-working taxpayers is focusing on real budget reform. With fiscal reform, like priority-based budgeting, state government could prioritize spending by focusing on the core functions of government that Alaskans need.”