Contributed by Jim Crawford
Watching the legislature wind down is painful. This year, the Democrats own the House and the Republicans own the Senate. The House wants income taxes. The Senate says no. The House wants to jack up oil taxes. Senate says nada. The good news is that revenue projections were off by one billion dollars, reducing the budget gap, from $3.5 billion down to $2.5 billion.
Current law allows the legislature to spend the $10.3 billion earnings reserve of the Alaska Permanent Fund. Fifty percent of earnings have been accumulating (net of dividends) from when we had budget surpluses. The Constitutional Budget Reserve stands at $4.7 billion. The Statutory Budget Reserve is at $3.5 billion. Reserves total $18.5 billion, covering the gap for 7 ½ years. The price of oil is up and production through the pipeline has increased annually for over ten years. New discoveries signal a solid fiscal future.
Hidden cash in state agencies is most certainly not necessary. Alaska Housing shows $1.5 billion in net-worth. Alaska Industrial Development and Export Authority has $1.3 billion. Unrestricted funds, not needed for programs, are $1.8 billion. Add them to the earnings reserve of the Permanent Fund to bring reserves over $12 billion. That $12 billion is our hedge against lower prices and production declines. The combination of funds is a conservative fiscal plan.
With $12 billion in reserves, we need not spend the principal of the Alaska Permanent Fund. The Percentage of Market Value formula is being used by both the House and Senate to raid the fund. POMV enactment would change the cash withdrawal to allow spending the principle of our fund. Voters said no to spending the principle. It’s not prudent or necessary. As my grandfather, Sheriff Pop Crawford, (Hope, 1910) used to say, “If it ain’t broke, don’t fix it.”
As Alaskans, we traded our individual rights to resource wealth by voting for our Alaska Constitution. Resource wealth is jointly owned by all Alaskans. Constitutionally, 75% of that resource wealth runs government as it has for the last forty years. 25% is reserved for the people’s fund. But, the spenders are not satisfied. They want 100% of the resource wealth for government spending.
The spenders are brow-beating legislators, demanding that they keep spending high. Spending more is not the answer. Alaskan education spending is second highest in the nation, while delivered results are second worst in the nation. Change how education and government services are delivered to change the result for our kids and citizens. The status quo is not working.
A frustrated priority of seniors is stabilizing the Alaska Pioneer Homes. Scaring pioneers with budget cuts is outrageous and unnecessary. The Pioneer Homes can bring in $225 million on a sale/leaseback, create an endowment fund managed by a public/private partnership and contribute millions over the cost of stabilized care for our seniors each year. The Pioneer’s solution generates more income than it spends. The legislature should act on it.
Let’s use all the tools including excess capital and leasebacks before more taxes. The legislature has the uncontested right to spend 50% of the accumulated earnings of the Alaska Permanent Fund on government without any further legislation. The other 50% is the people’s dividend money. We have $12 billion in reserves to back up the people’s choice. Then reduce spending to balance a sustainable budget.
No crisis exists that requires an income tax, an increase in oil and gas taxes, a sales tax or a violation of the constitutional ban on spending the principle of the Alaska Permanent Fund. Legislators must hear the people. They must respect Alaskans enough to not reduce the dividend or spend the principal of the Alaska Permanent Fund without a vote of the people. Say a prayer for their wisdom.
Then they can adjourn.
Jim Crawford, a third generation, lifelong Alaskan, is former chairman of the Trump Campaign for Alaska. He is also president of the Alaska Institute for Growth, an advocacy nonprofit to grow 100,000 new jobs in Alaska. Jim is a real estate broker in Anchorage. Jim served Senator Stevens as coordinator of Alaska offices in the seventies.
