COMMENTARY: Restore the dividends, end the recession
The people we elect will either manage the state’s assets wisely or continue profligate spending, wasting our resources.
Alaskans bear the highest unemployment rate, 7.3 percent, in the United States. We are in the third year of a self-inflicted recession. We’re missing the national Trump recovery because we have a governor and Legislature without a plan for a successful economy. They don’t know how to get us out of this recession. I do.
As a banker and student of economics for decades, I understand consumer spending accounts for 70 percent of a state’s economy. The governor and Legislature cut dividends in half for the last three years. We had the money. The funds didn’t go to government services. They should have gone to the private sector, creating jobs throughout Alaska.
The Permanent Fund Dividend program is a conservative, return on investment enterprise, uniquely Alaskan. We thought we protected the Fund and the dividends in the Constitution by passage of the amendment setting aside 25 percent of royalty income plus the earnings of the Fund.
But, the Legislature arbitrarily overrode the statutory dividend and cut another $1,050 per Alaskan, for the third year. That cost our economy another 2,000 jobs. Dividends are only paid on collected earnings held in the Earnings Reserve. We have nearly $19 billion in the Reserve including $2.7 billion set aside to pay lowered dividends and general fund expenses for this year. The Constitutional Budget Reserve has another $2.3 billion in spare change.
Cuts to the dividends weren’t used for operating expenses of government. They cut the heart out of small business. Alaskans’ personal economies suffered. I read financial statements and I’m horrified by what I read. In fiscal years 2013 and 2014, the Legislature gave $376 million to the Alaska Gasline Development Corp., an unbuildable pipedream. What a waste.
Consolidating agencies should be a key part of Alaska’s money saving strategy. Alaska Housing Finance Corp. and the Alaska Industrial Development Corporation, could free their combined net worth (not used for mission), of $2.8 billion dollars. Gov. Bill Walker awarded a study to Boston Consulting Group for over $800,000 to study consolidation. Then buried it. That further demonstrates that costs are out of control, even under two different governors and many different legislators.
The duplicity of most legislators and the governor is astounding. They tell you that Alaska had a 2017 budget deficit of $2.4 billion dollars. If you read the fiscal year 2017 Comprehensive Annual Financial Report, you will find that Alaska had a $3.9 billion surplus. That’s like having a million in your savings account earning $100,000 while your checking account is overdrawn. Count only checking, you have a deficit. Count all the money, you have a surplus. Our Fund grew by $6.5 billion in fiscal year 2017 and by about $5 billion in the fiscal year 2018 just ended.
Our surplus will be even greater. Our oil income will be up almost $1 billion in fiscal year 2019 due to the rise in price and 30,000 barrels per day in new production through ConocoPhillips at Greater Mooses Tooth-1 and 12,000 barrels per day from Hilcorp at Moose Pad in the Milne Point unit.
Earnings of the Permanent Fund and our recovering economy can and should fund both full dividends and protect education and public safety. Dividends are the private sector way to capitalize hundreds of small businesses. We need to implement a vision that grows the Alaskan economy.
It was my honor to chair the statewide campaigns that elected or reelected Presidents Ronald Reagan, George H. W. Bush and Donald Trump. I also ran the campaign in 1999, Alaskans Just Say No, which stopped the last raid of the Alaska Permanent Fund. We won that campaign 83 percent to 17 percent. The public understood the raid and said no.
If your legislator told you we had a $2.4 billion deficit, ask about the $6.55 billion in earnings of the Permanent Fund in 2017 that they were not counting in order to concoct the deficit. That’s how they’re cooking the books. Some Legislators just want more money. They want to increase oil and mining taxes. And they want a personal income tax. We have the earnings to manage our resources wisely, within a spending cap.
Dividend cuts cost our economy consumer spending of $4,300 per person in the last three years, devastating our private economy. We can end Alaska’s recession with restitution of the 2016 and 2017 cuts and full payment of the 2018 amount statutorily required. Economists agree.
Legislative inaction just cost us another 2,000 jobs. Join me in demanding a special session, called by the Legislature prior to the General Election, to correct their unjustified and injurious cuts to our dividends. The money is in the bank today. The public has a right to know which candidate is your Permanent Fund Defender or Permanent Fund Spender. Find out and vote accordingly.
Jim Crawford is the former president of the nonprofit Permanent Fund Defenders. He also served Governor Hammond as a member of the Investment Advisory Committee which formed the investment and corporate strategy of the Alaska Permanent Fund Corp. in 1975. He is a candidate for Senate District I (Spenard and Midtown, U-Med District in Anchorage)