Crawford: Looking for $1 billion for budget? Power Cost Equalization Fund has it - Must Read Alaska
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Friday, April 23, 2021
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Crawford: Looking for $1 billion for budget? Power Cost Equalization Fund has it



“Defunding power cost equalization would gut a lifeline for rural Alaska” was published by the Anchorage Daily News on Nov. 10.  Meera Kohler (chief executive officer of Alaska Village Electric Cooperative) expertly laid out the history and purpose of the Power Cost Equalization Program.  

The op-ed was beautifully written and very persuasive. But it missed the point of advocates to end the unconstitutional appropriations of dedicated funds.  

No one is attempting to stop the appropriation of funds for Power Cost Equalization. Those of us advocating consolidation of agency funds to the Constitutional Budget Reserve want to solve the current fiscal crisis by using unspent, appropriated funds that are currently restricted by the Legislature. These appropriations exceed the needs of their programs and earn huge profits for their agencies.  

The Power Cost Equalization Fund was established by the Legislature in 1981 as a fund of the Alaska Energy Authority.  The AEA audited financial statement lists the balance of the fund, $1.06 billion, as restricted. But Article 9 of our Alaska Constitution bans restricted or dedicated funds. No appropriation except those specifically authorized by an Amendment to the Alaska Constitution, federal appropriations or funds existing prior to statehood are allowed by the Alaska Constitution. No other appropriations can be restricted to a special interest. 

Dedicated funds are, per the Alaska Constitution, illegal.  

PCE has not been approved by the people at a statewide vote as an Amendment to the Constitution, is not a federal appropriation, nor did it exist prior to statehood.  Last year, PCE earned $74 million dollars.  And it paid recipients throughout Alaska $30 million.  And made a profit of $44 million to grow more agency. 

I have no objection to the appropriation and payment of funds to help equalize costs of power in villages throughout Alaska.  During the Palin Administration, my Fairbanks friend and I convinced the governor to add $1,000 to each Alaska Permanent Fund dividend for power cost equalization.  

The equitable argument of urban areas having access to cheap hydro power through construction of dams throughout Southcentral and Southeast is persuasive.  But should a needed appropriation of $30 million for a worthy purpose like PCE hold hostage over $1 billion dollars owned by all Alaskans?  I think not.

That billion dollars and other excess capital should be transferred to the Constitutional Budget Reserve as required by the Constitution and the statute which created the CBR.  

All dedicated funds not in compliance should be liquidated and saved to the Constitutional Budget Reserve.  The CBR requires a 75% vote of each house to use so the money can be protected from wild spenders.  With those funds, the budget deficit disappears.  And the regional internecine wars in the Legislature can end.

We can bridge the fiscal gap by using the available assets of the State and push for new production in the oil, gas, mining, and investment sectors.  The crude producers, old and new, have identified over 1 million barrels per day of new production which can add to the production of existing legacy fields.  

The producers and the State must realign their interests and advocacy for new production for the health of the state.  With nearly 60% of Alaskan voters defeating the tax increase in Prop 1, the decks are clear to resume the Renaissance of the North Slope.  Let us accelerate our production.  

My mother taught me that if I got in trouble, I had to work my out of it.   “Produce your solution, son.”  Good advice. My family has been here since 1898. We’ve all worked through worst crises than we now face.  We can rebuild our economy and protect our familys’ health.  

Power Cost Equalization is an honest and honorable goal.  We can support annual appropriations for the costs of the program.  We, however, cannot set aside all Alaskan’s money for one region’s benefit. 

Advocacy for preserving PCE is now an organizing call for the next Legislature. It should not be. Republicans and Democrats and independents, conservatives, and liberals understand that the crushing cost of energy must and should be addressed annually.  

Different approaches are all open to discussion. Some believe that new roads or expansion of major projects can solve the regional high cost through industry. Some believe that subsidizing power cost is currently insufficient. 

These matters can be reconciled with good will in an open discussion of the state’s priorities.  But first, we must follow the Constitution and not restrict appropriated money for special needs.   

Alaskans can pull back from the brink of fiscal instability. We just need to use our assets wisely, not squirrel away money we need today as illegal dedicated funds.   

Jim Crawford is a third-generation Alaskan entrepreneur who resides in Anchorage with his bride of 37 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.  Crawford known as the Permanent Fund Defender was a member of the Investment Advisory Committee, appointed by Gov. Jay Hammond to plan and execute the Alaska Permanent Fund Corporation.

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Latest comments

  • Couple points this article very smoothly omits:
    One, no amount of playing shell games with state finances or fantasizing about more oil production will solve our budget problems. The only solution to our problem IS TO CUT STATE SPENDING SUSTAINABLE LEVELS. This will mean kicking a whole crowd of special interest hogs away from the state trough, a tough job but it’s inescapable, there is NO OTHER WAY out of our budget crisis, WE HAVE to cut state spending.
    Two, demand for oil is WAY down and the price of oil is in the toilet and is projected to be there for all the foreseeable future.(20 years) World economic production hadn’t recovered to pre-2008 levels even before the panic lock down and the silver bullet of renewable energy systems, battery storage, is turning a huge corner as I write this. A lot of the future expansion of demand for energy will be filled by much cheaper renewable energy, not fossil fuel energy. It’s likely a person who fell in a coma today and woke up in 5 years wouldn’t recognize the world energy markets, they will be so drastically different. Oil is on it’s way to becoming a niche fuel, reserved for very special, specific purposes, like long distance air travel. So the traditional “just wait and hope for better oil markets to solve the state’s overspending problems” is fast, if not already becoming a thing of the past.
    We can do as the above author suggests and just play a shell game with an existing account but, like an alcoholic taking a drink to ease their hangover, that does nothing to solve the problem, we’ll be back here in a year or two still desperately needing to cut spending. So let’s cut spending now before we end up in full-blown emergency territory with no options.

    • Thanks for your thoughts. I agree that cutting spending is the key. A more realistic Constitutional budget cap would be great. But we can’t cut our way to success. We can produce our way out.

      Prognosticators have predicted the demise of fossil fuels for centuries. Oil and gas produced in Alaska replace dirtier oil imported to the West Coast by foreign oil. Alaska has a great Renasaince going on despite the vagarities of the pricing. You can be certain that the price will go up and down just when we think it will go down or up. That’s the business. Regardless, it’s a blessing that’s caused great benefit for Alaskans.

      The Permanent Fund gives us sustainable supplemental earnings if we invest it wisely. Let’s clean up the books and look long term.

  • Excellent article, and support from nothing less than the State Constitution !

    As you pointed out the other day there are over 7 billion in funds squirreled away in different accounts. The State has a way forward, but will it take it ?

    Just like the binding caucus rule, poor, even criminal practices, still riddle our state Legislature. That’s why we have 3 branches of Government, to supposedly rein in this kind of activity. Checks and balances were set up for this very reason.

    • Alaska’s checks and balances seem, at best, tenuous.
      Our take from Article IV, Section 5 of Alaska’s Constitution is that seven Judicial Council members control one-third of state government.
      Seems like yet another recipe for corruption… or one big happy family if legislative criminals manage to team up with judicial criminals.

  • How about taking a chainsaw to the bloated, inefficient, union beholding government?

    Never forget while the rest of us suffered, state workers never missed a single day of work.

    • There is no question the far left elements of the State’s labor unions have made a corrupt mess of our education system, our law enforcement and fire departments and public employee groups and the government bloat that followed must be cut if we are ever to have a bright futures for Alaskan’ again….it will take a long time to turn it around but it is something we must all work on getting done.

    • ……and got fully paid for every one of them.

    • Sure many public sector union workers missed work days due to COVID (teachers). What they didn’t miss was a paycheck……… that’s for sure!

  • As is true at the Federal level, if only lawmakers would follow our Constitution, instead of scheming to work around it, Governments would work much more efficiently & equitably.

  • Yes, PCE has to be evaluated using current state fiscal metrics. But right now, with people like Edgmon and crew in charge the PCE corpus (if you like) would evaporate in one fiscal year. So as others have pointed out we need, for the first time in state history, real reductions in state operations as the highest fiscal priority. The necessary discussion specific to PCE must include what a mess state government has made of state energy; Cook Inlet oil and gas tax credits were intended to do for Southcentral what PCE did and does for all of the state save the Railbelt and Juneau. And it did that but then the state stiffed the tax credit owners. To then balance that for Fairbanks the state loaned $125 million to the borough, interest free, so Cook Inlet gas could be trucked to Fairbanks, but now that energy and finance structure has collapsed from its own weight. As a subsidy, PCE prevents anyone from investing in more cost-effective energy. What is the answer? Clearly we have to take state government out of energy because of the state government track record, because the state has exhausted its subsidy capability, and because government subsidies kill self-reliance, initiative and self-respect. One anecdote: It’s the height of unfairness that the North Slope Borough qualifies for PCE while creaming $400 million a year off the top of state oil revenues to have an executive jet aircraft fleet, a fish and game department, and a school system that pays so well that it costs the entire state millions and millions of dollars each year (because so many TRS Tier 1 teachers and school administrators have camped up there for 3 years to boost their ‘high 3).’ Does anyone see holes in this analysis?

  • Spending $400,000.00 on an electric bus for a PRIVATE COMPANY in Tok is one of the many wells the state is throwing money down and this idiocy needs to stop. APC has become a method to maintain the ever expanding AEA, which is NOT a good steward of the state largess it recieves.

  • PC isn’t as much needed now as it was in the past. With oil prices bottomed out, it really shouldn’t cost that much in the bush to get a gallon of heating oil or gas or whatever. Prices fluctuate yearly based on what the fuel companies have to pay for it plus delivery charges. With pce kicking in, the fuel should be free out in the bush but it’s not. Bush prices isn’t falling the way it should be but because of world oil prices so somebody’s making a killing on this. Local tribal entities along with the federal government give fuel vouchers to anyone who qualifies. Tribal corporations certainly have squirreled away enough money off of various entitlements be able to pick up the slack for their members. That’s the way it’s done and tribes down in the connected 48 states. It’s time for tribal authorities to start paying some of their own bills instead of burdening the government. My tribe the Choctaw refused to take handouts from the government in order to remain independent of the government.

  • Okay, tough guy.
    We’ll see your $1 billion (Power Cost Equalization).
    And raise you $645,298,473.11 (Alaska Municipal League Investment Pool).

  • Remember the “budget tool” website earlier this year? It didn’t matter how much you played around with it, you always ended in the red, if you did not eliminate the PFD and raise taxes.
    This was a manipulative tool to make Alaskans accept some form of taxes or give up their PFD, while essentially making no real dent in the status quo of bureaucracy.
    I agree there should be a thorough financial audit to find ALL the “little slush funds” and return them to the CBR. Abolish dedicated funded programs. If they insist that the PFD has to compete, so should these programs. Since the pandemic we have had many “non-essentials”, it is time to contract non-essential tasks out.

  • Fine and dandy, so cut the PCE and then hear the outrage from those that depend on it to get through the winter. Just like the outrage we heard on the PFD being cut. As the first commentor, Matt, suggested, stop the State from spending more than what it gets from income. But who in the State Legislature has the cahones to actually follow through with that? I’m hoping for some common sense governing this time around, with emphasis on conservative-led government. Most Alaskans want that and let this election be a sign post for upcoming elections …

  • I paid $1.77 a gallon the other day for gasoline. I’m telling you the fuel companies up there taking the energy to the bush is raping the government to get the pce money.

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