James Kaufman: Fiscal planning and Alaska's productive path forward - Must Read Alaska
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James Kaufman: Fiscal planning and Alaska’s productive path forward

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By REP. JAMES KAUFMAN

Alaska needs a path forward, and Alaskans deserve the most productive path, one that maximizes our incredible potential. 

During my 2020 campaign to represent Alaska House District 28, I was often asked to explain why I was running and what I would do differently.  

I said then that I thought Alaska has not been managed for best results. We deserve better than business-as-usual. We need more performance, less waste.  

What would I do differently? 

I can make a difference using problem-solving techniques learned during my career in quality and project management.  

  1. Study the problem and define it accurately.
  2. Determine root causes, seek to understand underlying conditions. Treating symptoms is not the cure.
  3. Develop corrective action plan(s) using knowledge learned in steps 1 – 2.
  4. Implement corrective action plan(s) while managing the impacts of changes.
  5. Monitor improvements and sustain progress. Adjust using steps 1 – 4 as problems arise.           

If what is described above doesn’t sound like can-kicking government business-as-usual, it’s not. So, let’s apply this process to one of our biggest challenges.

Step 1: Defining the problem

Alaska has a structural fiscal imbalance. Symptoms include revenue not matching our spending, use of our savings account to cover expenses, and abrupt policy changes. We have a lagging economy along with declining resource revenue, and a shrinking population. 

We need a coherent set of policies that work together to control spending while optimizing benefit from our resources.     

The governor, past and present fiscal policy work groups, and others have taken on the “comprehensive fiscal plan,” but Permanent Fund Dividend/Revenue combinations have monopolized the current conversations. 

I’ve also been working on fiscal policy.  I am now presenting a key component of my plan to improve our fiscal balance, which I believe to be the top issue now on the table. 

Step 2: Determining root causes

Spending: Alaska has been operating without an effective appropriation limit for nearly 40 years. The current limit was enacted in 1982, when approaching peak oil production. The timing, plus a population and inflation adjustment, have created a cap too high to control spending. 

Productivity: Resource revenues have declined while we have been operating in ways that do not support a healthy, productive economy. Flawed or outdated processes have decreased satisfaction, transparency, and trust. There is immense opportunity if we can do a better job investing in Alaska and Alaskans.

Step 3: Corrective Action Planning

Goal: Develop policies that prioritize stability, control spending, and increase the health of our private sector. Use measurements and control mechanisms that are relevant. 

To accomplish this, I have submitted legislation proposing a new, functional cap which will use a factor based upon a five-year trailing average of private sector economic performance within Alaska’s borders. Specifically, the factor being averaged is real GDP minus government spending.

If the government wants to spend more, it must support policy that will enable the growth of our private sector (productive) economy. A spending limit tethered to our GDP creates a constructive link to our private sector and ensures that government doesn’t outgrow the economy that it’s meant to support. This proposal would set a spending cap roughly at current levels and would include a constitutional provision allowing for some flexibility in the case of unforeseen risks.

The results of the legislation would be the following:

  • Our revised upper control limits would refocus and prevent chronic overspending.
  • The link to our private sector performance would incentivize beneficial policy, enable prosperity, and increase revenue from economic activity.
  • Pressure on the permanent fund as a funding source will decrease in the presence of increased prosperity and resultant revenue.  
  • Using a 5-year rolling average creates predictability. Spending during short-term downturns will be slightly inflated by the averaging, while government growth will lag slightly behind in sharp upward trends.
  • A resilient Alaskan economy is a good counterbalance to the Permanent Fund’s reliance on global investment.   
  • Lastly, we can avoid the trap of becoming a “financialized” economy that relies only on the permanent fund while ignoring other opportunities. There is a real hazard of becoming a trust-fund state with a trust-fund government that does little to develop its people and resources. 

Step 4: Implementation

On Aug. 16, the Legislature will return to Juneau for a third special session. The agenda includes an appropriation limit.

Hopefully my proposed legislation will pass. We need to create a strong link between government and our productive economy before it’s too late. Let’s be productive and take this opportunity. 

Rep. James Kaufman serves in the Legislature for Alaska House District 28.

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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

  • Too complicated and too many assumptions that may not be accurate. My plan is much simpler and will soon be published here at MRAK or ADN possibly. I hope you see fit to support it. Cheers

  • The legislature already has the power to reduce spending. A cap doesn’t help anything, it’s just more useless regulation to get in the way of things.

  • I talked with Representative James Kaufman when he was evaluating and validating whether other Alaskans thought as he did——-before he decided to run for office. I think he cares about Alaska and Alaskans. I think he has thought long and hard, using his professional background, to develop a plan. I think it is a good solid plan. Let’s hope he can build a momentum to put the plan into action!

  • Nice try Congressman. Couple of problems though. A rolling five-year average produces a spending level that lags by one (or two) years, and union CBAs won’t let us lay anyone off during lean years, leaving us with a downward-spiraling economy at exactly the time it needs private-sector stimulus. Growth during fat years will not be trimmed during the lean. Second problem: the PFD is NOT the State’s money to spend, period. “Decreasing dependence on the PFD” just means you’re planning on stealing less, not ceasing to steal – and do you really think the demrats are going to leave it alone? Not on your life my friend – if you balance the budget even without the PFD, the ‘rats will try to find a way to spend it. PASS THE CONSTITUTIONAL AMENDMENT to enshrine the statutory – not the Governor’s compromise 50–50 split – the statutory formula in the State Constitution.

    • There is NOTHING in any State CBA that prevents the economic layoff of a State employee. If you don’t have the money to pay the employee, the employee goes, and there’s really nothing more than irritate you that the union can do about it.

  • Sounds like a lot of words, but I imagine the reality is once again aimed at reducing the payout to AK from the PFD. Look the botoom line is that AK, The State, has been giving total access to ALL of the state’s mineral wealth. In most states private land owners control the mineral wealth located on or in the land they own. The citizens made a good faith agreement with the state. The gave up their individual claim to the mineral wealth in exchange the state pay every resident out of an agreed upon percentage of the yearly earnings from the state’s mineral wealth. It has worked well and the fund has grown from 750,000 to over 60 Billion in roughly 40yrs. That is an amazing amount of growth. As the funds wealth increases to does the dividend paid to the residents. There is no cap to the payout! If anything the residents of the state have been cheated over the past 40yrs. For the fund to grow from less than a million dollars to tens of billions of dollars, the distribution formula is sadly lop sided in favor of the state. Now the state wants to steal a portion of the resident’s revenue in order to support bloated gov’t spending…..stay in your lown lane, Alaksa. If you need more money then figure out a way to get if from your portion of the fund and quite trying to steal money from the residents who collectively gave up their mineral rights so that ALL Alaskans could benefit from the mineral wealth not just a wealthy minority of land owners. If you the state doesn’t like the deal, then they can pay out fund to it’s resident’s and then give them the right to own mineral rights. Then the state can raise money the old fashioned way be stealing wealth through various tax schemes instead of the current mindset of politicians of having their cake and eating it too! It’s one or the other you thieves!!

    • “The citizens made a good faith agreement with the state. The gave up their individual claim to the mineral wealth in exchange the state pay every resident out of an agreed upon percentage of the yearly earnings from the state’s mineral wealth.”
      This is total fiction – one of those urban legends that has been repeated enough that good intentioned people like yourself have come to believe it. Subsurface mineral rights were held by the State in the Alaska Constitution at Statehood (1959)- well before anyone knew of the bonanza of oil discovery at Prudhoe Bay.

      • And before they knew about the code of federal regulations regarding the intended taking of ANY private property rights. IN this case the intent was to foreclose mineral rights. It was unconstitutional. Also it did not vitiate reality. Federal land title was delivered into private title complete with all rights having never been in state title for the state to strip mineral rights. The state still awaits its selections fifty years later. The state and its captured inhabitants await further myths.

  • All those words saying nothing.

    Here’s a fiscal plan for Alaska:

    cut the government to 2010 levels.
    Sell the ferry system
    Sell the train
    End union contracts.
    Pay the statutory PFD.
    Cap the legislature at 90 days.
    Cut state workers.
    Cut the UA budget. Make them sell or rent their lands.
    Get rid of the stupid nanny state/woke programs.

    Mostly:

    Do not spend more than you bring in
    Do not spend more than you bring in
    Do not spend more than you bring in.

    See? A simple, easy to understand plan. In plain English, not swamp speak.

    • When you get elected on a plan to do all that, let us know how it works out.

  • Kaufman said a lot but didn’t have any solution ,,,,more hot air !

  • Good approach and plan James. Let’s see if it passes the hoard of free spenders in Juneau.

  • We have enough money if we don’t waste it on a dividend. But I’m a Republican, so never been comfortable with UBI.

    • What does UBI stand for?

  • I like a systemic approach too. One goal I have is development of the state with a small “d”. I don’t need NATO to send diseases to get us all sick and dying. I need our representatives accepting a stipend to represent me and not NATO or their long legged lobbyists. Do not accept gifts and soires. I said once to a DOT federally funded employee “It sounds to me like you aren’t designing and building for me and Alaskans needs.” He said cheerfully, “I’m not. I’m designing for the wants of the visitor from the lower 48”. So, do you see where that leaves us, Alaskans? Why we aren’t even a tic on a varmint’s tail.

  • Masked Avenger has the right idea! Cut the bureaucratic BS!

  • This ideal will stay in the Cloud zone until Alaskans see the light and they themselves remove corruptible leaders such as Republican types as Von Imhof, Rassmussen, Merrick, and most Democrats out of public and private influential roles; while Alaskans Kaufman and his allies can maintain their integrity.

  • I live in District 28. I am a retired government employee. James Kaufman’s bill has a lot of merit if government were a private business. Because government leaders have limited terms, many studies are a waste of taxpayer revenue. Most studies are never published, due to the limited terms of officials, and thus are never completed or seen by the public in their draft form. Drafts are not considered public record. Unless someone remembers a study was done, they do not know enough to ask for the draft as public information.

    The root cause you want to uncover has probably been studied by paid consultants multiple times and never published. Corporate memory is limited in government to management turnover, which is limited to elected official terms. Well-intended draft studies are forgotten and buried in the archives or never become property of the government. Most drafts are retained by the consultant that studied it. If the powers that be don’t like the draft, we may never know the outcome. But the next elected official may study it again and pay again…what a waste. It’s a great income opportunity for consultants however.

    Private companies usually have a longer corporate memory and drafts can be retained and resurrected until completed.

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