I've great respect for Gov. Bill Walker. He's been dealt some difficult hands to play, particularly in regard to our state's budget. However, I'm very disappointed in his special session platform, which reveals troubling expectations for the upcoming special session.
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With all due respect, our governor must speak in complete sentences. In an Oct. 2 presentation to Commonwealth North he spoke of the Oct. 23 session and his expectations. The governor said, "We're at a point where we can no longer be the only state in the nation that doesn't have a broad-based tax." That sentence is incomplete. The governor should finish it by saying, "and we're the only state in the nation with $64 billion dollars in the bank solely for the benefit of its residents."
Think of that: Alaskans have $64 billion dollars in the bank but our governor is asking the Legislature to ignore that wealth and tax only the working people of Alaska to fund government. There's something wrong here.
Each and every Alaskan currently has an $87,000-plus investment account and it's growing every year. For 30 years, each Alaskans' account has yielded investment earnings, earnings used for our Permanent Fund dividend with most of the remainder left in the fund's Earnings Reserve Account — the ERA — which today contains about $14 billion dollars. This savings account has always been available for appropriation by our Legislature.
[For most Alaskans, an income tax would hurt less than a PFD cut]
But for years the Legislature has been afraid to spend the Earnings Reserve. They've been paralyzed by B.S. –- that is the Bumper Sticker screaming in the next election that he or she is "raiding our Permanent Fund." And then next comes the inevitable accusation: "Hey! You're stealing my PFD. …" It's a very common reaction, as it should be. The PFD is the peoples' money. It's the result of developing our resources and wisely setting aside 25 percent of the revenue for the people rather than spending it on bigger government.
But back to the Earnings Reserve – the source of the PFD check. Let's look at the effect on the PFD check if we withdraw a certain amount from the Earnings Reserve account in order to fund services needed for government. The source of the following calculations is a document from the Permanent Fund corporation titled "Financial Projection Comparisons of the Alaska Permanent Fund with Various Appropriation Levels to the General Fund" dated April 4, 2017.
Everyone has their own number representing our deficit. My number is somewhere around $2 billion. So, let's for the next five years, take if needed $2 billion each year for five years to help fund this shortfall. That amount, maybe with a little help from the Constitutional Budget Reserve if needed, fills the budget hole.
But here comes that Big Question: "What happens to my PFD check?" According to the Permanent Fund Corp. the answers are: 1. the first year it shrinks by less than a dollar; 2. Second year it's $22 less; 3. over the five years period our PFD is a total of $420 less because of the $10 billion withdrawal; 4. Over five years that's a reduction in your PFD of 3.2 percent. ($13,087 vs. $12,667 5-year total). Conclusion: The effect of using a reasonable amount of the ERA to fund needed government services has very little effect on our annual PFD check.
Now folks will say, "Well, that's OK for five years but we're draining our big saving account." That's certainly cause for concern but it's not quite accurate. If we look beyond my five-year example, the documents show if we actively managed the Earnings Reserve account rather than just worshiped it, and we adopted a spending strategy based on longevity by 1. paying a static "half dividend" — as we are now — and 2. not inflation-proofing unless needed — as we are now — the ERA lasts until FY 2030. There's a lot of good things that will happen in Alaska in the next dozen years.
But you ask, "How can this be?" Well, it's because of the enormous effect of $64 billion being invested around the world for all Alaskans by the world's best money managers. It's the Power of Earnings. It's what the late Michael Burns, CEO of the Permanent Fund Corp., said when speaking of the Earning Reserve Account, calling it "Alaska's self-licking ice cream cone."
So, let's complete the governor's sentence by recognizing the true wealth of Alaska's balance sheet. Let's use the Power of Earnings to enable every Alaskan to contribute just a little so the working families of Alaska don't have to pay a lot.
Gary Wilken is a retired small-businessman who represented Fairbanks and Fort Wainwright in the Alaska Senate from 1996-2008.
The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com.