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Thursday, November 23, 2017
HomeColumnsAlaska’s self-licking ice cream cone

Alaska’s self-licking ice cream cone

GARY WILKEN
GUEST COMMENTARY

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 revealing troubling expectations for the upcoming special session.

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 broadbased tax.”

Hawkins

That sentence is incomplete. The governor should finish it by saying, “and we’re the only state in the nation with $64 billion in the bank solely for the benefit of its residents.”

Gary Wilken

Think of that: Alaskans have $64 billion 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 day.

For 30 years, each Alaskans’ account has yielded investment earnings, earnings used for our Alaska Permanent Fund dividend with the remainder left in the Permanent Fund Earnings Reserve account, which today contains about $14 billion. This account has always been available for appropriation by our Legislature.

But for years the Legislature has been afraid to spend from 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 common reaction, as it should be. The dividend is the people’s 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, which is the source of the annual dividend check. Let’s look at the effect on the dividend 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 Alaska Permanent Fund Corp. entitled “Financial Projection Comparisons of the Alaska Permanent Fund with Various Appropriation Levels to the General Fund” and is dated April 4, 2017.

It was produced by the corporation and is available from me at garywilken@me.com.

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 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., these are the answers: 1. The first year it shrinks by less than a dollar; 2. The second year it’s $22 less; 3. Over the five-year period our dividend is a total of $420 less because of the $10 billion withdrawal; 4. Over five years that’s a reduction in your dividend of 3.2 percent. ($13,087 vs. $12,667).

Conclusion? The effect of using a reasonable amount of the earnings reserve account to fund needed government services has little effect on our dividend check.

Now, folks will say, “Well that’s OK for five years, but we’re draining our big savings 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 adopted a spending strategy for longevity by paying a static “half dividend” as we are now and not inflation- proofing unless needed, as we are now, the earnings reserve account lasts until fiscal 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 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 earnings reserve account.

He called 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 and a former state senator who represented Fairbanks and Fort Wainwright from 1996 to 2008. He served eight years on the Senate Finance Committee, four years as a co-chairman.

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Suzanne Downing had careers in business and journalism before serving as the Director of Faith and Community-based Initiatives for Florida Gov. Jeb Bush and returning to Alaska to serve as speechwriter for Gov. Sean Parnell. Born on the Oregon coast, she moved to Alaska in 1969.

Latest comments

  • Mr. Eileen is almost exactly right. He left out a major piece of the PF earnings distribution calculation. That piece is the piece that requires NO reduction in the PF Shareholder Dividend. It is called the 50-50 split.

    Every year 50% of the earnings are placed into the PF Earnings Reserve for government, that is what has allowed the ER to grow so rapidly. The other half funds the Shareholder Dividends. So, even at a rate of government take at $2.8 billion, without eliminating the people’s share, the ER will last closer to 10 years. Done the math, it works.

  • I sure miss Sen. Wilken in the Alaska Legislature.

  • Wilken might want to submit this piece to ADN as commentary. He points out clearly and succinctly that the “sky is not falling” which is what Walker and the House majority seem to claim.