When I was a member of the Alaska Legislature, I chaired the House State Affairs Committee that worked with its Senate counterpart drafting the original investment strategy for the Alaska Permanent Fund.
We had hopes that the Permanent Fund would grow until its earning capacity exceeded oil revenues, at which time we hoped voters would pass an additional constitutional amendment committing all future oil revenues to the fund. An amendment authorizing the Legislature to draw out a fixed percent each year thereby creating an endowment to guarantee a stable economy with dividends included.
Last year, unrestricted oil revenues totaled more than $6.3 billion. The fund has more than $51 billion today. Add $9 billion from the budget reserve and $5 billion from the earnings reserve, and we have more than $65 billion. With earnings plus the injection of 25 percent of Alaska's oil royalty, the fund has enjoyed a historic 10 percent growth over the past five years.
It would require 9.7 percent of Alaska's total savings to equal last year's spending.
As one who has stood in the way for 30 years of funding government from the fund's earnings. I would stand down if a special election were held offering a constitutional amendment requiring 100 percent of all future fund earnings, plus 100 percent of all of this owner state's revenues derived from resource extraction, to be deposited into the fund -- while simultaneously authorizing an annual fixed percentage to be withdrawn to operate state government and pay dividends.
While most endowments limit their withdrawal to between 5 percent and 6 percent of their principal balance to assure longevity, most funds don't have large deposits derived from the sale of minerals supplementing their earnings. Investment earnings plus resource sale proceeds would assure continued growth even at an 8 percent withdrawal rate.
We are at the crossroads to do it or lose it. A special election in April amending the Alaska Constitution is necessary to consolidate all funds into a $65 billion Permanent Fund, guarantee dividends, authorize an 8 percent annual withdrawal and require 100 percent of all future resource revenues to be deposited into the fund. It could save our bacon.
Eight percent of $65 billion would make $5.2 billion available for spending in the first year. That's $200 million more than the Institute of Social and Economic Research is recommending for next year's budget, and enough to avoid another crash. The fund would continue to grow, it would guarantee dividends and assure a stable economy for the next 100 years.
What's left to think about?
Ray Metcalfe is a commercial real estate broker in Anchorage and long-time political activist. He has served in the Alaska House of Representatives as a Republican. In the 2008 primary election, he ran unsuccessfully for the U.S. Senate as a Democrat.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com.