Jim Crawford: Legislature has proven it will not create a fiscal plan - Must Read Alaska
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Sunday, October 17, 2021
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Jim Crawford: Legislature has proven it will not create a fiscal plan

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By JIM CRAWFORD

I keep hearing that Republicans must compromise to gain a fiscal plan for the State of Alaska. 

Compromise is a virtue in the politically correct “woke” world. I looked at the two issues that are supposedly stopping the enactment of the fiscal plan.

First, the demand of the Democrats and the RINO Republicans that new revenue in the amount of $700 million must be added in new or current taxes in order to justify a statutory Permanent Fund dividend. A statutory dividend is one that adheres to current Alaska law, which says the dividend calculation is based on the number of eligible Alaskan applicants in a dividend year and half of the statutory net income averaged over the five most recent fiscal years. 

If those of us who are advocates of the private sector just compromise and ask our Legislators to raise oil taxes by $700 million by killing the oil tax credit, we could have a fiscal plan? Right? That’s the same logic as Commonwealth North, which built a computer model with just three alternatives for folks who want a fiscal plan: 1.  Raise oil taxes, 2.  Enact a sales tax or 3. Re-enact a personal income tax.  

Factually, we don’t need another $700 million fed to our bloated state government from the private sector. If we compromise, we capitulate.

Let’s be clear: If you read the CPA’s opinion to the financial statements of the State of Alaska, you discover that our books are in surplus. In other words, we bring in more revenue than we require to balance our state’s budget.  The report also discloses that expenses each year have gone up regardless of those who would tell you that the budget has been slashed.  

Let me explain. If you project a budget of $1,000 but only actually spend $800, you can claim (just like the majorities in both houses) that you have slashed the budget by 20%. The fact that last year, the Legislature spent $750 is not mentioned.  The fact that you are asking to increase the budget by 25% is not mentioned. 

The budget is where the liberals want you to focus. But reality is the actual income and expense of the financial statements. Do you see the shell game? They are hiding our income and expense with word games.

Second, the Democrats and the RINO Republicans deny we have the money to pay a sustained dividend. They want us to ignore the actual performance of the Alaska Permanent Fund, which in the last fiscal year made $19.4 billion net income for the fiscal year ending June 30, 2021.  We made another $395.5 million just during the month of July 2021.  

However, because of the insanity of the Percentage of Market Value rule, our earnings of 29.73% ($19.4 billion) were hidden from you and only 5% of profits were available for dividends and appropriations.  Slick trick.    

The Legislature set aside 5.25% of the entire Permanent Fund for its contribution to government expense and dividends.  Arbitrarily.  Willingly.  They cut off the earnings to deny their constituents those earnings. Then they used the act they created to deny their constituents their earned dividends. They left the money in the Reserve account, subject to their immediate appropriation. 

So, the fisherman in Bristol Bay with a wife and three kids gets stiffed $16,000, while the Legislators burn through the 3rd special session with cash per diems.

According to the financial statements for July, 2021, we have $20.9 in our Permanent Fund Earnings Reserve Account.  Some legislators have the gall to say, we don’t have the money to pay the collected and earned dividend.  Going back to an earnings calculation as we had for nearly 40 years and getting away from this insane system of “calculation by confusion” is required and obvious.  If we compromise, we capitulate.  

Dividends set by earnings calculations are always self-sustaining. The key word is “always.”  If we have a good year, we pay more. If we have a bad year, we learn our lessons and change personnel, just like every other profit seeking enterprise in Alaska.      

The status quo perpetrators are deathly afraid of the constitutional convention. How do the special interests hold onto their iron-fisted control of the State of Alaska budget and force more spending each year for our failed education system? Or the failed judicial appointment process that provides an automatic majority of bar association members to preclude conservative judges?  Or telling people that the budget is going down while the actual expenses are exploding.

Let’s be straight: The Legislature, through its coalitions, has stopped Gov. Mike Dunleavy is his tracks. They have stopped his cost cuts, his statutory dividend, his stand against public corruption and his Constitutional amendments to protect the dividend, cap state expenses and contain the Legislature’s never-ending thirst for state taxes.      

Why would a representative or senator from the rural area of the state deny his or her poor constituents their dividends?  The statute on the books was not amended to change the distribution formulae.  Our Legislature, abetted by Gov. Walker, changed the rules, ignored the law, and now want public approval for their intransigence and spendthrift ways.   

To put the voters back in the driver’s seat means driving straight to the constitutional convention. The opposition is already using scare tactics to convince you that it’s a terrible idea. To them, it’s terrible since it takes the power away from their special interests and reinstalls the public in decision making for Alaska.

If you want a solution to the dividend, if you want an incorruptible judicial system, if you want constitution protection for a budget and a vibrant state economy, take a hard look at the constitutional convention. The protection for Alaskans is that every issue that gains a majority in a constitutional convention must be approved by the vote of a majority of Alaskans at the next election.  

It is time for a change. The Legislature has proven that it will not create a fiscal plan.  Their plans end the Governor’s plans for a vibrant economy. We can’t compromise without capitulation.  It’s time for Alaskans to step up and vote for our children’s future.

Jim Crawford is a third-generation Alaskan entrepreneur who resides in Anchorage with his bride of 38 years, Terri.  Capital Alaska LLC is a statewide commercial lender which analyses 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.  

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  • You would make a fantastic Governor Mr. Crawford!

  • Crawford: “To put the voters back in the driver’s seat means driving straight to the constitutional convention. The opposition is already using scare tactics to convince you that it’s a terrible idea. To them, it’s terrible since it takes the power away from their special interests and reinstalls the public in decision making for Alaska.”

    I always note the hubris of such statements. A constitutional convention would require the election of delegates. What makes you think that election would be much different than the ones we perform now for the legislature? What makes you think special interests will go away? What makes you think the outcome of a convention would be to your satisfaction?

    Jim, As a supposed financial expert – what do you think we should do with the $12 Billion in debt that is owed to the CBR? Do you believe, as many apparently do, that Article 9, Section 17 of the Alaska constitution can be ignored forever?

  • How can we stop this corruption! How and where do we sue the legislators?

    We Alaskans need to stop them dead in their tracks

    Please let me know!

  • But they and their staffs keep collecting LOTS of per diem. In no other business besides government do people get paid MORE for NOT doing their jobs!

  • Fully agree with you up to the constitutional convention stuff. Given the weakness of our Republican party, we would likely see our constitution rewritten by libs in a communist or Hitler-style fashion. Don’t want to open that can of worms

  • This is all true so far as I can see, but for my taste it is a bit circular in presentation and it is too wordy. The annual state budget does continue to rise. Government accounting is arcane, and all 3 branches of state government play hide the peanut – too often confusing themselves in the process of hoodwinking taxpayers. Raising taxes on oil companies is certainly one very possible outcome – more likely than cutting the budget given currently elected people, unfortunately. If I differ in my opinion from this opinion piece it is that I believe a rigid and fixed annual draw is necessary if the PF is to survive. I also believe that 5.25 % is too high for this particular fund. The budget reductions and changes upon which Governor Dunleavy based his 2018 campaign and attempted to implement in 2019 (for the 2020 budget) would have brought a conclusion to the years of budget debate and left us with a better much state government in the bargain. That he lost his courage, and that we now have ranked choice vote counting does not leave me optimistic.

  • Yup. They are our betters and will treat us like children. It’s their money, we work for them.

    Now sit down, shut up, wear your masks.

  • Jim,…. ….Question:
    .
    Is net earnings on investment considered INCOME? ie….25% earnings on PF through investment over 12-month period.

    • I’ll answer that one. Absolutely it is income to the State. If it was your portfolio, you would be federally taxed on it. If the State distributes it to you in a Dividend, you will be taxed on it. The way the Permanent Fund is set up, that 25% windfall could be spent in a single year through legislative appropriation. To do so would be very irresponsible. Remember, stocks can go way down too like 2008. That is why the responsible accepted strategy for using trust funds (which is what the Permanent Fund is) is to spend only 4-5% a year to even out the ups and downs. Whatever you DONT spend continues to appreciate.

    • Yes, earnings were 29.7%. We have the cash to solve the problem. The full dividend spurs the economy for all Alaskans.

      • Thank God you aren’t a Keynesian like the Dems and Lefties, Jim. I put you somewhere between Von Mises and the monetarists.

  • Your depth of understanding of issues critical to the survival of Alaska is truly impressive, well done!!

  • I’m confused by the demands for a constitutional convention. Has our current constitution failed us because it is flawed, or because we have put people into office who haven’t had the best interests of Alaskans at heart? I argue that it is impossible to create a document that can’t be subverted by those who wish to profit from public service. It is certainly possible to create a document that makes it easy for them to do so. Therein lies the hazard.
    Our state created a constitution that has worked very well for Alaskans until the oil boom and its enormous flush of money came into play. Before the black gold rush, Alaska politicians were concerned about doing what was good for the “general welfare” (sound familiar, check the preamble to the US Constitution) of all Alaskans. After that, money prevailed. Oil ruled. The AK constitution was assaulted from every angle by those hoping to cash in. They, to a great extent, succeeded, and they are the REPUBLICAN party. I’m not saying all GOPers are vile money grubbers, but the VMGs prevailed. That’s why a state that had the richest money lode ended up squandering it in order to fill the coffers of the rich, multi-national oil companies. We truly had, and have, the best government money can buy.
    Now, they want to change the state constitution to suit their needs. They want to be able to impose a permanent GOP government in order not to govern, but to rule.
    Be afraid. Be very afraid.

    • HOMO…….YOU are very confused.

    • Very good questions. In my opinion we have a good constitution and there is no need for the changes the Dividend-promoters are suggesting.
      The main problem is the legislature is not honoring the Alaska Constitution – specifically Article 9, Section 17 Budget Reserve Fund. Read it for yourself. It takes a little time to fully understand it. It is very confusing how the Legislature plays games with the income from the Permanent Fund Earnings. They seem to claim the PFER is “not in the General Fund” even though it is “available for appropriation”. Bottom line is they never should have drained the CBR while they had sufficient funds available for appropriation. And then there is the whole question about the sweep and reverse sweep which needs to be settled by the Alaska Supreme Court. Dunleavy was afraid of what they would decide and pulled the lawsuit.

  • It warms my heart when someone finally says it.

  • This is overwrought analysis. Not completely wrong but mostly the nattering of a guy with decent intention and no grounding in what is actually happening or possible. Plus, it makes a point of pumping up Mike Dunleavy and ripping the legislature, as if the legislature and only the legislature is to blame for the sad state of political affairs in our state.
    Truth be told, there is plenty of evidence that the Governor has not exactly covered himself in glory trying to deal with the fiscal problems. And yes, there are a bunch of legislators (from both parties), who have not demonstrated genuine ability to craft an acceptable solution to the obvious fiscal problems facing Alaska’s state government.

    The truth is Alaska needs to deal with overspending by our state government, figure out how to pay a proper PFD via a constitutional guarantee and add at least a bit of revenue to the state coffers. We cannot keep spending using savings or drawing on the income from the Permanent Fund without seriously harming the prospects for our state down the trail. Collectively, we spend too much on government up here, do not pay anywhere near the cost of government via taxes and act as if someone should keep the whole thing going by magic. The PFD is not just another welfare payment — it reflects an ownership interest held by each and every Alaskan in their mineral wealth, the funds we citizens put a slice of the non-renewable communal mineral wealth that belongs to all Alaskans into the Permanent Fund. Paying each citizen owner of the Permanent Fund a dividend from the earnings of their sovereign fund every year via dividend helps individual Alaskans and diversifies the Alaskan economy. The PFD shouldn’t have to compete with any other governmental function. The Permanent Fund was not set up as a government rainy day account.
    The obvious problem with how our elected officials — the governor and many legislators — is that too many of them know what they do not want and are unwilling to work together towards something that would work for most Alaskans. Plenty do not want any taxes. OK, how is that working in a world with very few taxes and a budget that is unbalanced. Lots of legislatures claim we have cut the budget to the bone, which is laughable from many perspectives. The Governor’s budget went up last year. There is easily $200M – $300M in General Funding spending in the budget that could be cut without sacrificing essential services. But many of the fluff programs and expenses in the budget have political patrons from either or both parties that keep spending well above what is necessary for a functioning society. Face it, the Governor and plenty of legislators we have sent to do our work are hooked on spending and spend they do, even to the point where they are spending savings or trying to spend money they want to borrow. Remember Mike Dunoeavy’s big bond borrowing proposal this last year? Mercifully, they got croaked by the legislature.
    I support payment of a PFD and absolutely think a PFD formula must be embedded in the Alaska Constitution (we know we cannot count on the politicians to honor a statutory provision setting out the payment plan — Bill Walker, Mike Dunleavy and a whole lot of legislators have been ignoring statutory spending allocation provisions for years). At the same time, until a PFD formula is passed by the legislature in the form of a resolution and adopted by the voters, the funds for the PFD must be approved via an appropriation each year. This means the PFD is subject to hi-jacking by the politicians. Mike Dunleavy knows this and proposes a super-sized PFD without really trying to get the measure through the legislature. Paying a big PFD using savings, as Governor Dunleavy proposes, is unsustainable and probably not a “one time deal” as he claims. The legislature gets no help or guidance from the governor in this rugged situation. Not surprisingly, the legislature without any genuine assistance or communication from the executive branch on how to reconcile spending, taxes and payment of the PFD adopts a status quo budget that is sort of balanced and funds a short PFD with left over bits of revenue.
    There is blame enough to go around for the sad state of fiscal affairs Alaska has fallen into. Mike Dunleavy likes being Governor more than getting into the hard, hard tasks of actually governing. The legislature is littered with rookies and newbies that are nearly clueless about building a sustainable budget that actually meets the needs of Alaska citizens. More than a few legislators are captive to special interests and big money organizations or lobbyists that are willing to put Alaska’s present and future behind their narrow interests. The list of genuine adults elected to the Alaska Legislature or inhabiting key executive branch positions of authority who have the skills and ability to craft a budget that will work for Alaska is problematic.
    Houston — we have a problem here.
    It might take a couple more election cycles to elect enough adults to get the job done. Given a few more years, some of the new folks in the legislature might gain an appreciation and perhaps enough skills to address the budget problems in a mature manner. It is not clear whether the current governor is up to the hard task of governing — actually governing instead of making political pronouncements. Mike Dunleavy has shown skill in making campaign promises about the budget and the PFD but his promises have yet to be delivered. Whether this kind of conduct will be perpetuated is anyone’s guess but right now the prospective field of challengers for governor is looking thin.
    In the end, we get what we deserve up here in this little experiment in democracy. Apparently we like dysfunctional government because we keep sending dysfunctional representatives to serve our collective interests. How else can you explain the election and continuous re-election of individuals like Senator Reinbold?
    Oh well ………………………………

    • Joe, Great comment!

  • Joe, right now oil is trading at $72/bbl. The Permanent Fund, with judicious management is providing $3.1 Billion this year to the State operating and capital budgets so there is no need for income or sales taxes. To impose personal taxes would essentially make taxpayers fund a portion of the Dividend. With the Permanent Fund appreciating 24% this year, future earnings available to appropriate will sharply increase. However, we need to straighten out the mess of how the legislature uses the PFER as a budget reserve (not protected by 3/4 majority requirement) and has drained our true budget reserve (the CBRF). Bottom line is the CBR has to start being restored by the PFER endowment. Either that or take the CBRF out of the constitution. Which, of course, I think is a bad idea too.

    • Didn’t necessarily say Alaska needs an income tax or sales tax. We should increase moto fuel tax and designate funds to help build capital budget for roads, airports, harbors and other physical infrastructure. And, a review of mineral taxes is justified. A sales tax is stupid as it is both regressive and expensive to administer.
      The point is cuts, consolidation and revenue augmentation all need to be addressed. All should be on the table right after a decent PFD formula is embedded in the Alaksa Constitution.

      • We have over $83 BILLION in the Fund. Why are we arguing over how to NOT spend some of it on our own consumer economy during a period when average Alaskans are facing a cash shortage due to Covid? The statutory law instructs a payout. The electorate shareholders are not receiving their corporate dividends because the wealthy legislators and their super wealthy puppeteers would rather spend it on government services. What’s wrong with you people?

  • Alaska is sure breaking new ground in the history of the United States. Alaska now has a positive cash flow through the current taxation system and endowments. There is no need for individual income or sales taxes. In the future, the State will continue making a “profit” just like a giant corporation. The only question now is what to do with the “profits”. Invest in infrastructure? Invest in services? Pay cash dividends? We have done a little bit of everything for better or worse.
    My only other idea would be to create an individual endowment fund where each person is awarded each year a proportional share of a collective portfolio managed and invested by the Permanent Fund. As years go by, your shares accumulate and appreciate. “The Alaska Resident Endowment Fund”

  • “…….If you want a solution to the dividend, if you want an incorruptible judicial system, if you want constitution protection for a budget and a vibrant state economy, take a hard look at the constitutional convention………”
    An incorruptible judicial system? Is there a plan to reform the court system that I’m not aware of?

  • I believe the answer is yes. Should President Donald Trump acquiesce to continue to serve this republic as President the return to the US Constitution will be swift and sure. It will include reviews of states’ noncorming color of law enactments digressing from the Constitution and consequent retraining since nearly everyone has been taught wrong since the days of Grant’s presidency. The bar association didn’t “get here” until 1800’s. Whatever did we do before then? That’s what we’ll be doing again. They know it too.

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