Alaska must adhere to a sustainable budget now and live within its means to avoid, within the next 10-years, the institution of a broad based [sales or income] tax and use of a portion of the earnings of the Permanent Fund according to the Institute of Social and Economic Research (ISER).
Problem: Current Spending
Spending is out of control. The operating budget in Alaska went from 5.47 Billion in 2011, well within a sustainable spending limit, to 7.78 in 2013, a 40% increase! While spending has dropped roughly 20% since the all-time high of 2013, revenues have collapsed by 35%.
The outgoing Legislature/Governor has been deficit spending. Nearly 1/3 (6-billion) of the state’s savings necessary to produce income for a higher sustainable budget is gone. Last year, the sustainable budget level decreased from 5.5 to 5.0 billion.
Spending levels are Unsustainable. The Government does not have a revenue problem. It has a spending problem.
Solution: Save More, Spend Less
Alaska’s Petroleum Wealth “Nest Egg”
1. Financial Assets (Financial Engines)
- Permanent Fund (PF)
- Constitutional Budget Reserve (CBR) Savings
- Statutory Budget Reserve (SBR) Savings
2. Petroleum Revenues in the ground (limited)
Facts to Know:
- Over 90% of the Government operating budget comes from Oil Revenue.
- 25% of oil revenue goes into the permanent fund (Constitutional)
- PF interest income goes to the Permanent Fund Divided (PFD) and the Unrestricted General Fund (UGF), which is the government’s operating fund
- Excess money not budgeted (spent), from the UGF goes into savings
- Oil production has decreased continuously since 1989 and will continue to do so.
- Our goal is to keep oil production at a greater than 6% annual decrease.
- As Oil production revenue decreases, it must be replaced with income from the savings.
- Larger financial engines (savings) are vital in the production of this needed income.
- Income generated from the savings is essential to maintaining a Sustainable Budget and achieving ZD-FI.
- A sustainable budget is Constitutional. Alaska Constitution Article 8 Section 4 states:
Fish, forests, wildlife, grasslands, and all other replenishable resources belonging to the State (the people) shall be utilized, developed, and maintained on the sustained yield principle, subject to preferences among beneficial uses.
Alaska’s financial resources similarly can sustain the state over the foreseeable long term if not “used up” by the current generation of Legislators.
Benefits, Long and Short Term
- Avoids a statewide [sales or income] tax and use of a portion of the earnings of the Permanent Fund according to ISER.
- Makes Alaska a desirable place for investors and entrepreneurs to want to do business; therefore, more jobs and a better economy.
- Produces a stable job market and economy, outside the government sector, that is long term, strong and reliable. Continuous economic growth thrives independently in this type of business environment.
- Fulfills a duty to future generations of passing on the liberty and freedom that we inherited from those before us.