Alaska’s pursuit of independence

I read an ADN article recently, “Alaska faces huge short-term and long-term budget problems, and the Permanent Fund is at the center of both,” and was struck by the similarities it has to a personal finance hobby I’m passionate about sharing: financial independence.

The letter I had written was applying the principles of the financial independence movement to our Permanent Fund. This “movement” was popularized by bloggers like Mr. Money Moustache. However, its roots were several decades earlier with Vicki Robin and J.L. Collins in their breakthrough book, “Your Money or Your Life.” I like to imagine Gov. Jay Hammond could be added into this group as the founder of the Alaska financial independence movement.

In a nutshell, if you save enough money, you can live off the interest forever if you manage it properly —don’t kill the goose with the golden eggs. Right now, our Permanent Fund stands at about $73 billion. That sounds like a lot, but for us to reach our goal of our state reaching financial independence, we need to get to at least $100 billion. Lucky me; that nice round number makes math really easy. We’re 73% of our way to our financial independence goal. The Permanent Fund was created in 1980, so it has taken us 30 years to get this far. If we can add to the principal — sometimes called the corpus, which is Latin for “body” — at the same rate, we’ll have our golden goose built in 11 years. We would not only be the first state in the U.S. to reach that goal, but then we’ll all be living — to some extent — off our combined investment.

This golden egg would enable us to finally streamline and increase the reliability of our state operations. So that no matter what is happening with oil, tourism, fishing or our other industries in a given year, we can operate our state with reliable funding. That way, teachers won’t get laid off and rehired every other year, with the best ones leaving the state as they understandably get tired of this goat-rope approach to budgeting. We can finally reach a status of maximum efficiency in our state operations, without getting kicked back to square one due to erratic and poorly planned budget cuts.

If the state wants to start eating our goose now, especially in giant 10% chunks (that’s three years of work and savings gone in one wild spending spree), it’s going to take much, much longer for us to reach that goal of a financially independent Alaska — if we ever reach it at all. That will make us the people who took the golden eggs not only from our future selves, but also our kids, grandkids and all future generations. That isn’t the legacy I want for myself.

The state, like households, has a simple equation to work when it comes to reaching financial independence. Income, plus interest from savings, equals expenditure — the amount you can safely spend. That’s really all it comes down to, although people can make a lot of money trying to convince you otherwise. If we can grow the state’s interest from savings to be equal to or greater than our expenditure, our state won’t need the income — i.e., taxes — piece at all. That’s why it’s really interesting to see supposedly anti-tax populists support a 10% pull from the Permanent Fund. Either they actually do support taxes, or they support state bankruptcy and anarchy.

I hope that this year gets easier for everyone, and that 2021 brings with it wisdom and blessings for Alaska and Alaskans.

Grace Johnston is a nonpartisan, multi-degree engineer and veteran who loves living in Anchorage with her husband, daughters and curly-haired pup.

The views expressed here are the writer’s and are not necessarily endorsed by the Anchorage Daily News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)adn.com. Send submissions shorter than 200 words to letters@adn.com or click here to submit via any web browser. Read our full guidelines for letters and commentaries here.