Alaska is not broke

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GUEST CONTRIBUTOR
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By JIM CRAWFORD

 Let me say that again: “Alaska is not broke.”  

As a banker in Alaska for about 50 years prior to retirement, I have a time-consuming habit of reading lengthy financial statements, since the devil is always in the details.  

I was most pleased a dozen years ago when I discovered Alaska’s “Comprehensive Annual Financial Report” (CAFR), required by federal law.  The CAFR is the audited financial statement report that shows the actual income and expense and balance sheets of our whole state government. 

The report shows anyone exactly how our Alaska money is managed.  You can find it at http://doa.alaska.gov/dof/reports/resource/2019cafr.pdf.  

Studying the CAFR reveals one truth: managing assets through legislative appropriation is not working. 

Take the POMV (percentage of market value) system that draws money from Permanent Fund Earnings in a convoluted way. We have a standing law on the books that clearly says to Legislators: “Pay the dividend of 50% of permanent fund earnings to Alaskans and you can use the other 50% for government, if you need it.” 

Instead, legislators adopted a different approach, and nine legislators were retired this year in the primary election as a result. Legislators who thought that they could spend our dividends on larger government, rather than follow the formula, lost their right to represent us.  They were wrong, and paid the price for being rebellious public “servants” who forgot whom they worked for. 

After reading the CAFR for fiscal year 2019, I came up with a plan that could manage the assets of the state of Alaska better than now.  The plan is a bridge, because we need the economy not to tank during our rebuilding effort to produce more revenue from increasing oil production on the North Slope.  

There is good news. In addition to our current oil production of the legacy fields on the North Slope at around 490,000 barrels per day, there is another 1,063,000 barrels per day ready to go into the pipeline. In turn, two times more production means multiplying the revenues for Alaska by three.

These are actual oil discoveries awaiting development investments either by infrastructure investors, the producers, or both. Those new barrels of oil solve all our financial problems – if we do not kill the golden goose by voting yes on the disastrous Ballot Measure 1, or chase another producer out of Alaska.  

Defeating Ballot Measure 1 is an immediate action that must be taken for this plan to work. 

So, how do we bridge the few years we need before we produce enough oil to get out of the pickle we are in?  By remembering, “we’re not broke,” and using our strong financial assets to meet our fiscal needs.

Here are some of the state agencies with billions of dollars of overcapitalized balance sheets that can help us through consolidation:

University of Alaska                                       Net position $1,820,190,000

Alaska Housing Finance Corporation            Net position $1,571,423,000

Alaska Industrial Development Corp             Net position $1,374,903,000

Alaska Energy Authority                                Net position $1,543,000,000

Non major components                                  Net position $1,461,757,000

Total available capital                                    Net position $7,771,273,000

What I mean by “overcapitalized” is that each of these organizations have real money on their balance sheets, but do not use this money for their missions.  

How you can tell if it is “overcapitalized?”  If the agency had this money last year and the year before and the year before that – it is overcapitalized.  This growth in government does no good for the Alaska people. Let us put this “lazy money” to work in the Constitution Budget Reserve, wipe out the Legislature’s prior borrowings to the CBR, and invest it or make it available to the General Fund. Solve the budget wars and build our bridge to a very bright future.    

Of course, we still need to shrink state government, but following this simple plan and remaining patient can provide the resources required to get us through the right-sizing process.  

After all, just like the Alaska Permanent Fund, it is our money – Alaskans’ money.  And in the immediate future, we must vote NO on Ballot Measure 1 to preserve the PFD. 

Jim Crawford is a third-generation Alaskan entrepreneur who resides in Anchorage with his bride of 36 years, Terri.  The Alaska Institute for Growth is a local think tank which studies and reports on and may sponsor projects of sustained economic growth for the Alaskan economy.   Mr. Crawford known as the Permanent Fund Defender was a member of the Investment Advisory Committee, appointed by Governor Hammond to plan and execute the Alaska Permanent Fund Corporation.

20 COMMENTS

  3. Jim,
    Not really sure how your logic on voting NO on ballot measure #1 will help retain the PFD?
    It actually seems like the politicians…aka the “government” is garnishing our PFD’s to pay oil subsidies to the tune of roughly a Billion dollars a year?
    What other countries pay international oil compainies to export their petroleum reserves?
    It seems like Alaska is not getting it’s fair share of the profit…look at the Texas GDP (nearly 2 TRILLION a year). Then look at AK’s GDP at nearly the bottom of the country at (54 BILLION a year).
    We cannot afford to loose 2/3’s of our PFD to government then give our oil away for peanuts.
    Either give the property owners back their mineral rights or tax the producers a fair amount.
    I am voting YES on ballot 1 because I already lost the majority of my PFD.

    • So Steve, how do you think taxing oil companies will in any way increase your PFD. That’s the joke. “We want our fair share”. You do realize the “We” in that statement is the politicians. Please tell me you aren’t so naïve to think that the taxes raised will be passed on to you. I vote no on 1 because I want to starve the beast. You don’t give more booze to a drunk to help him sober up. In the same way you don’t give more money to the politicians to help them become more fiscally responsible. It has nothing to do about “my” fair share. If you want to increase the royalty payment to the permanent fund per barrel of oil, then you could say Alaskans Fair Share. Otherwise it’s just politician smoke and mirrors to get you to give them more spending money. I would rather have the oil companies spend it than crooked politicians any day.

    • Steve please sit down and read what Jim Crawford wrote more carefully and your vote on Ballot #1 will change to a NO….you are a smart guy and surely know a yes vote would be for further destruction of Alaska’s furture….

    • Texas has more rigs producing and older companies that have their debt paid off. Proposition One is about the politicans being gluttonous. Do not live in excess said the Greeks!
      The bottom line is oil exploration costs money and from the early days of Prudhoe Bay, the powers that be knew this. Nabors Drilling is a great example. The men that run these companies will go else where if exploration costs explode. Dead Canaries happen. It cannot be 100% risk. From the days of Red Adair!!!

  6. Thank you Jim. I alwsays appreciate your timely wisdom on Alaska’s finances and our stolen PFD. Keep sharing. Hopefully we Alaskans can get some true Conservatives in Juneau to fix our stolen PFD issues and so much more.

  7. Thanks for a great article, Jim.
    .
    May we add another group to help with consolidation.
    .
    The Alaska Municipal League Investment Pool has $667,635,549.27 stashed out of taxpayers’ reach. (amlip.org/)
    .
    The overcapitalization test appears to apply because the web site shows the Investment Pool started with $50M in 1995.
    .
    Remember, the Alaska Municipal League is a “… nonprofit, nonpartisan, statewide organization with a purpose to strengthen Alaska’s local governments.” Not people, not their economy… “governments”. (akml.org/)
    .
    Remember, the Investment Pool’s purpose is: “… to provide a safe, high-yield, short-term investment option to maximize revenue for boroughs, cities, school districts and other state government entities.” (akml.org/)
    .
    Okay, it’s not quite a billion, but added to your $7,771,273,000, it comes to $8,438,908,549.27, rather a good start to consolidation, yes?

  9. Facts really irritate people that want to use hype and obfuscation to push an agenda that is false on it’s face. Prop 1 is more of an attempt to create and avenue to extract more money form oil companies into PARTICULAR pockets, and they aren’t necessarily State of Alaska pockets. No on 1, vote the legislature conservative to get spending under control, and stop listening to the liars.

  10. Ahhh, a man with a plan. These days people complain, complain, complain, without ever offering solutions. I think they just like complaining! So, your plan is a breath of fresh air and seems very doable. Bravo! But then you went and ruined my image of you as a financial genius by insisting that Ballot Measure 1 must be defeated or it will kill the goose that lays the golden egg. Apparently you childishly believe the oil companies to be that egg laying goose. NO, Alaska is THE goose that lays those golden wonders and the oil companies are just hired hands who despite receiving record payouts for most of the last 40+ years are constantly whining about how they don’t make enough. You imply that BP pulled out because of our taxes. Really? Maybe BP sees an environmental disaster in the making and, after the “Deepwater Horizon” disaster, decided to let Hillcorp and Conoco be the ones holding the bag when it happens. Maybe, just maybe, some of BP’s execs finally realized their former classmate and executive contractor (Jordan Consulting Inc) was right and bad Troopers ARE bad for business. Either reason is closer to reality than your supposition that our taxes are already too high and that’s what ‘drove’ BP away. No, we’re sitting on lakes (plural) of oil which have NEVER been tapped…the oil companies aren’t going anywhere.

    • They may not be going anywhere but they also have no motive not to sit on the oil until the price goes up – and they’re certain they can’t maintain a low tax rate. That could be years. Meanwhile . . .

  11. When Jim says overcaplitalized agencies have “real money” on their balance sheets, what exactly does he mean. Cash? Property (that they may or may not be able to dispose of at the balance sheet amount)? Chairs and desks? Could be that “real money” isn’t as real as he is saying. The state own a lot of property, but it makes no sense to sell everything
    As far as oil goes, the problem isn’t that Alaska is running out of oil right now, the problem is that there is a glut of oil and prices are low and companies aren’t going to pump more oil out of the ground than they can move just to have it sit in their storage facilities, which are probably full now anyway.
    It make NO sense to sell our legacy oil at bargain basement rates and then pay the oil companies to take it away. That’s the current system. Passing Ballot #1 is not going to be a panacea, but it’s a step in the right direction.

  12. Thanks Jim I’ve looked and read about both sides your right on with your evaluation! The people that think they will get their PFD if this passed are wrong but they will never admit it! I will be voting No on prop 1 and prop 2 for that matter! And anyone that loves this State of Alaska should do the same! Hold politicians accountable the new ones getting in need to break these binding caucuses and reduce needless spending it get booted too! Alaskans need to stay awake about what’s going on down in the Capital!

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