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Brother, can you spare $10 billion?Editor's note: Mike Doogan is an Alaska State House Representative, author and former newspaper columnist. This commentary appeared in his legislative e-newsletter on Feb. 3. I have started to try to get support for my bill to put $10 billion into the Alaska Permanent Fund. The bill is in the Powerful House Finance Committee, of which I am an insignificant member. I haven’t asked for a hearing yet; I want all the members of the House to have a chance to think about it first. The bill has about the same chance to pass as a snowflake in Hades. There are many bills that offer us the chance to spend, spend, spend. Since spending is much more popular than saving -- particularly in an election year -- you can write your own script for poor House Bill 194. It won’t have a happy ending. But I’ll give you my pitch anyway. HB 194 is nine lines long. It would move $10 billion from the Constitutional Budget Reserve to the Alaska Permanent Fund. Can we afford it? Yes. In his presentation to the House Finance Committee last week, the Commissioner of Revenue said that the state will have $19.5 billion in the bank -- minus capital budgets and etc. -- at the end of the coming year. Would moving the money cause problems? No. At the moment, there is $11-point-something billion in the Constitutional Budget Reserve. Even I can do the math. The Alaska Permanent Fund Corporation says that it can absorb the money, although it might have to hire a few folks to count it and see to its investment. Will this happen? You tell me. HB 194 was introduced March 16 of last year and sent to the House Finance Committee and is just sitting there. All 12 members of the House minority are sponsors, and I am going from office to office to see if any majority members are willing to sign on. Why should they? Because any money that isn’t locked away will be spent. The Permanent Fund was created to keep the state’s citizens and politicians from running through the new oil money as fast as the pipeline could produce it. It has many fathers. The first attempt to create it was a bill that passed the legislature in 1976. It was vetoed by then-Gov. Jay Hammond. Led by Rep. Hugh Malone, legislators approved a constitutional amendment that read:
The amendment was passed overwhelmingly by the voters. After much to-ing and fro-ing, legislation created the structure of the fund in 1980. Two years later, the dividend program was established. And the rest, as they say, is history. Unfortunately, not all of that history is peaches and cream. Although legislators made additional deposits in the fund’s early years, there has been no voluntary deposit since 1985. Although money managers have made such shrewd investments that its value stands at about $40 billion, that’s only enough to put about $2 billion a year into the state’s coffers. A nice chunk of change, but nowhere near what it would take to balance the budget. Another $10 billion would be a nice addition. One more thing. A $10-billion deposit would add about 25 percent to the value of the fund. According to Alaska Permanent Fund Corporation estimates, in 10 years that would raise the dividend from about $2,300 to about $2,800. So judge for yourselves. I think the answer is clear. It will be interesting to see how many of my fellow legislators see things that way, too. The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch. Alaska Dispatch welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com. Having lived in Alaska for close to 70 years, I often think what would this State be like today if oil had never come about. Sometimes think it may have been better off. The last time oil revenues were low, then Governor Murkowski (Frank the bank) closed and appropriated the Science & Technology Fund and lowered the automatic deposit into the Permanent Fund from 50% to the minimum (see above) of 25%. Paying in the $10 Billion might bring us up to the par we should be at which is no-where close to the amounts that far seeing nations such as Norway have taken in. In our current governor's efforts to erase concepts such as conservation and any regard for the needs of future generations, the only value seems to be to burn through all of this non-renewable resource as fast as possible and give our fair share away to the Oil Barons. What if the price of a barrel of this black goo goes to $300/barrel or $1,000, then have we cheated our descendants of not just the various usefullnesses of this stuff, but a fortune which would make our prosperity look skimpy? The Iroquois Confederation, a body of law our founders drew from, required the consideration of the effects of an action upon the seventh generation out, folks we will never know. What will they think of our greedy and selfish ways? Thinking of Good old Frank. He campaigned that he would not touch the permanent fund, a campaign sign with that promise lasted the Nome winters far longer than the promise broken in less than two weeks. Perhaps like the Iroquois Confederation, but much more frequently, we Alaskans repetitively address a question automatically on our ballot, as mandated by our Constitution, that asks, "Shall there be a Constitutional Convention?" This happens each decade. Next time will be during the 2012 general election. Especially after Citizens United V. FEC, I think this could really open a can of worms if it passed-- what if Houston companies decided to bombard Alaska with media ads in the last few weeks before our general election encouraging a constitutional convention? If North Slope producers' lobbyists had failed to effect tax revisions through Alaska's government, perhaps they could just buy some ads and shove a constitutional convention down our throats and then try to influence delegates to revise oil taxes. Back in the 1970s this automatic recurring initiative passed once but was thrown out by a court because the State worded it incorrectly on the ballot. But every time it has come up I've been astonished with the percentage of voters who have supported it. Why did they support it? Who knows. Often around one-third of our voters have supported a Constitutional Convention. By the way, I love how the Iroquois Confederation dealt with lobbyists-- they paused for 7 generations before ratification. WE need a second Permanent Fund so their performance can be measured against each other. The permanent fund has lost $10 billion three times; twice on Mike Burns’ watch. Enough of following the market all the way the bottom. We pay hundreds millions for good advice and get none. I wonder how Norway's investments have performed compared to ours. They have invested a lot more money, but how have their funds performed? After our finite oil resources get exhausted, which will happen, the only thing left to finance our State's government other than taxing ourselves would be our Permanent Fund or a few other inconsequential taxes. Our State's budget usually exceeds 10 billion dollars. Alaska has about 700,000 residents, so, for every 10 billion that Alaska spends, this would amount to about $14,000 per citizen or $57,000 for each family of four (10,000,000,000 divided by 700,000 equals 14285). How'd you like to have your family of four paying $57,000 a year for your state's government? The Permanent Fund is currently around 30 billion. If you remove 5 percent a year from it, you'd get about 1.5 billion. So where would the other 8.5 billion come from? Our families? Representative Doogan's proposal is a step in the right direction. I guess we'd need a Permanent Fund of more than 200 billion to sustain our State's government at current levels. Doogan's proposal would set aside perhaps 7 or 8 percent of the total funds we'd need to save for when oil funds run dry. Oil funds will run dry. I really think that this is a good idea but, well, good luck. I recall listening to one of the co-chairs of the house finance sitting in a local restaurant explaining at some length why the Permanent Fund was a mistake and making an argument for the legislature accessing it because the "State" needed the money. Really? A co-chair of House Finance thinks the Permanent Fund was a mistake? What does this person think about Permanent Fund Dividends? Bad idea too? Who is this person? I knew Jay Hammond. Smart guy. The Permanent Fund was a fabulous idea as were the dividends. The mistake Alaska made is we didn't put enough money into the Permanent Fund. For decades, our legislature has been intoxicated with greed-- Perhaps Doogan realizes we should have put more into savings like Norway did. Norway is doing a lot better than Alaska-- now they can sustain themselves. Now they're rich. Now we're not. We are in the second year of the legislative session. So unless you heard comments a long time ago, apparently either House Finance co-chair Thomas or Stoltze may think the Permanent Fund was a bad idea. Which one? Or both? I'd love to hear more about the rationale from him or them directly and first person. Oldhaines, were you in Haines when you heard this discussion? |
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