By JON FAULKNER
Joshua Church is likely a great investment advisor. His writing is clear. But his rebuttal to Senator Myers fails to account for several core expectations Alaskans have of their elected representatives.
First among these addresses why Alaskans created the Permanent Fund in the first place: to prevent the legislature from robbing every penny of revenue from the people. Alaskans are tired of our wealth being squandered. Inadequte inflation proofing is a prime example.
Second, Mr. Church ignores the majority of Alaskan’s desire—and defensible right–to a FULL PFD under the original statutory formula.
Third, he dismisses a vital concept underpinning the Permanent Fund. It is not an endowment belonging to a board of money managers or to Government. It is a sovereign wealth fund deriving from, and serving the interests of, all Alaskans.
These ideas need to sink in. Those who oppose these concepts use all manner of deception to obtain control over the Permanent Fund. It is time to shine a bright light on our elected officials and the factions who influence them.
Alaskans need to know Governor Jay Hammond’s purpose for creating the Fund. Youth need to read Governor Walter J. Hickel’s book “Who Owns America?” to understand that our citizens are sovereign entities whom he described as shareholders in an “Owner-State”. Native sovereignty and land claims derive from an identical proposition: That government of, by and for the people does not own our resources, or decide by its ultimate authority our rights. Such rights and titles derive from the people whom government serves. Government is not the originator of sovereignty; it is the custodian and protector of it.
The concept of taking annually a “percent of market value” (PMV) sounds wonderful to politicians who want more of our hard-earned income. But recent history proves it doesn’t work. The simple truth is that the concept obligates the people to pay out money for government that it may not have.
Historic market returns may indeed be net positive over time, but a policy based on a certainty that our economy will grow and average a fixed return is dangerous. Who among us takes—regardless of our annual income—a fixed percent of our total wealth annually to fund our living expenses? This concept is a ruse to spend more money than we should.
Alaskans embrace sustainability—especially our youth who inherit the future , and our Native brethren who rely on the land. And yet, nothing is sustainable about POMV and our current level of spending. Contrast POMV with the original statutory formula for the PFD that is 100% sustainable because it takes for dividends only 50% of what was actually “earned” from only 25% of natural resource revenues. This equates to a 12.5% royalty on our income—a formula used by oil and gas producers to pay land owners that has proven sustainable for 100 years.
Once Alaskans understand the simple–who is taking from whom, how and why—other things become clear. Those who wish to protect the Fund and the original PFD want to keep two accounts—the constitutionally protected Principal and the separate Earnings Reserve Account (ERA). Senator Myers is right that merging them into one account weakens legislative safeguards and invites overspending.
Those who wish to syphon 100% of fund earnings into government generally favor merging the two accounts, bypassing legislative compromise, and avoiding budget cuts.
Alaska’s youth and Native community should wake up to this systematic pillaging by the Legislature of the Permanent Fund Dividend. Back only candidates for office who promise to protect Hammond’s unprecedented gift to all future generations.
The same greed that robs Alaskans of their royalty share fuels the impulse of politicians to spend at unwise and unsustainable levels. This is already eroding our democracy, our middle class and free enterprise.
The argument that our Permanent Fund doesn’t function like most “model” endowments or trusts misses the point completely. This is OUR money—the peoples fund. We accept the uncertainty that opposition party politics provides. We accept fluctuating dividends. What we don’t accept is duplicity, and select power-brokers, funded by unions, undermining the will of the people. Alaskan’s PFD is being re-directed into wasteful programs and entitlements that undermine our economy. Politicians complain about revenue uncertainty and “last minute” budgeting. And yet, few embrace forward-based budgeting based on proven income—which, were politicians serious about it—could be easily structured.
The majority of Alaskans embrace a “hands off” policy for the Fund, and full dividends, and yet our representatives reject a popular vote on these issues. Unions intervene to frustrate the will of Alaskans. We should question those who favor RCV-like referendums, fueled by outside money, but who deny Alaskans a voice in their own Permanent Fund.
To address Mr. Church’s conclusions directly:
Concern 1: “The Fund hasn’t been managed well enough to deserve more trust.”
This is not a separate issue; this is the main issue. The Board needs to hold open meetings and feel accountable to all Alaskans.
Concern 2: “A 5% draw is too high.”
Most Alaskans agree, but the reality is, there is no completely “safe” number. Being conservative means basing Fund draws—and the PFD—on actual earnings.
Concern 3: “We should only spend earnings, not principal.”
As to Mr. Church’s chicken and eggs analogy: First, live on only the eggs the chickens lay each month. Next, grow more chickens; finally, never eat more chickens than are necessary to sustain your egg diet. Further, there is no “outdated” method of investing. Alaskans want to limit spending by government, and not unduly restrict Fund managers from investing in the long term.
Senator Myers is right. Mr. Church’s prescription will cut the dividend and the value of the corpus, and lead to more government spending because legislative checks and compromise will be removed.
Jon Faulkner is the president of Alaska Gold Communications, the parent company of Must Read Alaska.
Spot on. Thanks.
Another senior contributor! But in reality this author is the man who told Suzanne Downing to pull the article she wrote about Alaska Atty General Taylor. He is de facto the Owner of MRAK.
It’s worth waiting for a while to see if Faulkner can make MRAK into
A blog worth reading. Alaska needs differing views.
So I will Try to be patient. But if the last four days are any indication of what the future holds for MRAK, the future does not look very good for Faulkner’s blog.
I already miss Suzanne. These first couple days aren’t lookin’ good.
All of us regulars at MRAK miss Suzanne. But give the new crew a chance. They may surprise.
Don’t try selling this down a primrose path. Your article is a marketing stunt, only!
Kind of long-winded and somewhat elliptical but essentially right.
The current POMV at 5% is unsustainable, especially given high administrative fees for managing PF investments.
The key is to elect a new governor who will draw the line on raiding the PF and get rid of goofballs like Craig Richards on the PF Board.
Agree! Getting rid of Lying, mealy-mouthed Adam Crum and the other lying buddy, Thune, of Dunleavy’s would be a good start. Change the statute on board member tenure, like Dunleavy and a few of his buddies worked on and turned into new statutes would be the first step once a new governor is on board. Good plan for future prospects.
Craig Richards has every government job conceivable. Has he ever had an hour or two in private work?
Totally agree!
Yah but we’ve been complaining and nothing happens. To many leftists in Juneau.
Need to know what can we do that’s productive moving forward to stop the greedy Juneau politicians from stealling the pfd monies. Need answers.
Exactly!
Concur
Less ability of politicians to seize the pfd the better.
Perhaps Mr Faulkner could provide the polling results that the Majority of Alaskans want a full PFD, over providing Constitutional requirements to provide public safety and education. At least Suzanne’s BS was harder to decipher
Frank, your BS is all the same. You must be a very unhappy man.
The problem, Frank is nothing in the constitution explicitly defines spending levels. For instance, public safety could be provided statewide by arming and training every single Alaskan. Education could be provided by vouchering out ed $$$ to the parents of every student at the same level homeschoolers are now funded.
The PFD v Whatever Your Ricebowl Demands argument is a false one, one that plays into leftist plans to grab and spend every single penny in the Permanent Fund as soon as possible. But you already know that. Cheers –
Alaskans voted twice on the issue of using the investment fund for government spending… Both times it was a great big HELL NO😁
NAILED IT!!!
Joshua Church lost me when he said Commonwealth North was Alaska’s most respected nonpartisan civic group.
I actually agree we should have a full Pfd. The current system doesn’t protect that anymore and the new system would not prevent that.
and, the PFD
Thanks for expanding my argument Jon – you laid it out well when I had not the time.
Well then people vote for someone who supports our PFD, most people from Anchorage call their legislators and tell them they’d rather loose their dividends than be taxed. Those are the people who get herd. Call your legislators!!!!!
I want my full statutory PFD restored. Governor Dunleavy has tried numerous times, but the insane left-wing Big Government politicians keep his efforts suppressed. Senator Rob Myers is a hero for speaking out on this.
Bravo
Mr. Faulkner and those agitating for a “full statutory PFD” want to resurrect the failed socialist policies of the past. As a young Alaskan, I want to work, raise kids, and retire in a state that encourages private investment and economic growth—not unearned handouts and a “gimme” culture. IMO the Permanent Fund should serve the dual mandate of growing the principal and supporting critical state services (eg infrastructure, public safety, and resource development). A unified Principal/ERA with restricted POMV draw would stabilize state revenues and help get Alaska growing again. I’m all for it.