February 12, 2004

Posted: Friday, February 13, 2004

February 12,

2004

 

 

Fellow Alaskans,

 

The 55 of us have spent the past

three days in Fairbanks at the Conference of Alaskans called by Governor

Murkowski to consider the fiscal future of our state and the proper role of the

Permanent Fund in that future. We believe there are five basic facts that

Alaskans must and do acknowledge.

  • The Permanent Fund must remain precisely that –

    permanent – and must be protected.

  • Permanent Fund Dividends provide the crucial link

    between the Permanent Fund and its true owners, the People of Alaska, and

    so they too must continue.

  • The fiscal crisis facing Alaska is a clear and

    present danger to the adequate protection of necessary public services.

  • Alaska must not impose self-inflicted harm. The

    delegates now believe that Alaska’s state spending is inadequate to

    meet current needs for public education, public protection, and many other

    necessary state services. Too many communities around Alaska, large and

    small, are already facing desperate decisions.

  • Alaska needs some kind of standby cash reserve so

    state and local government services won’t have to come to a

    catastrophic halt if oil prices crash.

    With these

    facts in mind, we have considered and discussed the four questions that

    Governor Murkowski specifically asked us, and here are what we believe are the

    best answers to them.

    1.

    style="mso-spacerun: yes">  Should the use of income from the

    Permanent Fund be limited by the Constitution to 5% of the Fund’s value,

    as the Permanent Fund Trustees have proposed?

    Yes.

    style="mso-spacerun: yes">  We must inflation-proof the Permanent

    Fund in order to keep it and the Permanent Fund Dividends (PFDs) from

    evaporating away in the future. 

    The “percent of market value” (POMV), as suggested by the

    trustees will put infla­tion-proofing into the Constitution, instead of

    leaving it to the Legislature’s discretion.  POMV is a technical change in determining how much money

    from the Fund is available, but it has nothing directly to do with the choice

    of using it for Dividends or spending it on anything else. That’s the

    next question.

    2.

    style="mso-spacerun: yes">  Should a portion of the income of

    the Permanent Fund be used for essential state services, such as education?

    Our answer here

    is “yes, but….” There are two conditions to our

    endorsement.  One, dividends must

    be paid out first under POMV.  Only

    what’s left over could be used for essential state services.

    style="mso-spacerun: yes">  Two, the delegates to the Conference of

    Alaskans recommend that the governor and legislature take action to balance the

    state’s revenues and expenditures, including but not limited to,

    consideration of a personal income tax, other broad-based taxes and other

    alternative sources of income.

    3.

    style="mso-spacerun: yes">  Should the use of the income of the

    Permanent Fund for dividends and possibly for other purposes be determined

    annually by the Legislature, as is currently the case?

    style="mso-spacerun: yes">  Or should it be dedicated in the

    Constitution?

    A reasonable

    percentage of the Permanent Fund money available under POMV should be

    constitutionally dedicated to PFDs in order to make them

    “permanent” like the Fund itself.  All other uses of the remaining Permanent Fund money should

    be left for the Legislature to appropriate, since it is impossible for this

    generation to predict what the needs will be for the next.

    4.

    style="mso-spacerun: yes">  Should the state maintain a minimum

    balance in the Constitutional Budget Reserve to stabilize state finances

    against fluctuations in oil production or prices?

    Yes, a prudent amount

    should be in reserve at all times, for two reasons.  We can’t afford to send home all the police,

    firefighters, teachers or other critical personnel because the state treasury

    is empty due to something unforeseen. 

    It is critical that a prudent amount be retained in a Constitutional

    Budget Reserve (CBR) to stabilize state finances against fluctuations in oil

    production or prices. This is necessary to maintain the state’s very good

    credit-rating which will save millions of dollars in the future. Therefore, if

    oil production is interrupted or prices fall, so that we need to draw the CBR

    below the prudent balance, the state needs a plan to refill it back to that

    level as soon as possible.

    We have been honored by the

    presence and words of former Governor Jay Hammond during the Conference of

    Alaskans, and we applaud his continuing passionate dedication to protecting the

    Alaska Permanent Fund and building a strong fiscal future for Alaska.

    style="mso-spacerun: yes">  We have been honored by hearing from

    hundreds of Alaskans during the course of the Conference of Alaskans, and we

    thank them for their contributions. 

    It has been an honor to

    answer the call of Governor Murkowski in his quest to address issues critical

    to Alaska.  We commend his

    willingness to bring together this diverse group of Alaskans and join him as we

    look toward the future of Alaska together.  We acknowledge the tremendous staff time put in by both the

    Administration and the different departments within the Administration, and by

    the University of Alaska and its staff.

    These were

    challenging discussions with no easy answers. We sincerely believe they are the

    best answers available for all Alaskans as a whole, and we know they are

    superior to the “easy” answers.  We have tried our best to represent the interests of all

    Alaskans, and we hope each of you will take up where we have had to leave off.

    It is time to act.  Thank

    you for the honor of representing you.

     



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