An estimated 598,813 Alaskans will be $1,107.56 richer next month, thanks to the state's sacred, golden cow: the Alaska Permanent Fund.
As Alaskans debate what to do with their annual check ‹ spend it, save it, give it away or some combination of the three ‹ they also should consider the best way to manage the fund.
Gov. Frank Murkowski on Wednesday said he supports the "percent of market value," or POMV, plan advocated by the permanent fund's board of trustees. The proposal, which can be implemented only by constitutional amendment, requires voter approval before it can take effect. It's a step in the right direction for the state's future financial security. And it comes tested: Most private and public foundations use such a system.
Under the proposal, the income the fund generates will stay in the fund, but fund managers would deposit up to 5 percent of the entire value of the permanent fund into the state's general fund, where it would be used to pay for dividends and government services.
Unfortunately, some Alaskans will see any change to the way the fund is managed as an attempt to "steal" their dividend and a conspiracy by those in government to create bigger government. They will say the state has a spending problem and there is no reason to use fund money to pay for government services.
They're wrong.
Rep. Mike Hawker, R-Anchorage, co-chair of the state House Ways and Means Committee, rightly assessed the state's financial situation when he said: "When the state's got $25 billion in the bank, and that (capital) has made $2 billion so far this year ... we don't have a fiscal problem, we have a problem of will."
We would add: When the state is sending out checks of $1,107.56 to approximately 598,813 Alaskans, it's laughable to think the state doesn't have money to do what it should be doing.
Lack of money isn't the problem. Too much spending isn't the problem. Lack of gumption to do the right thing is.
Actually, there are several right things the state should be doing, since there is not one, simple solution ‹ for example, cut the budget ‹ to the state's financial woes. As Hawker noted earlier this month during a hearing in Fairbanks, the state's budget would have to be reduced by 25 percent in order to balance it with a cut.
That might sound like the perfect solution to the advocates of small government, but such a drastic measure would create economic and social chaos within Alaska. While Alaskans celebrate their independent spirits, they are woefully dependent on government for all kinds of services that few would do without ‹ and many of those services they should not have to do without.
Instead of one simple, unworkable solution, Hawker has presented a five-fold strategy to bridge the state's budget gap that includes:
Controlling government costs;
Promoting economic development;
Increasing existing taxes or instituting a new broad-based tax;
Instituting a mechanism to mitigate rapid changes in oil prices; and
Using the so-called POMV proposal that would allow some permanent fund money to be used for government.
That five-pronged approach is a sound strategy. All five elements deserve serious consideration and should not be derailed by those who want no changes in how the permanent fund is managed and misrepresent how those changes would affect the fund and Alaskans' dividends.
The POMV plan, in fact, is designed to guarantee the health of the permanent fund in the following ways:
1. It offers constitutional inflation-proofing protection of the entire fund. The current method only inflation-proofs the principal.
2. It offers a spending limit by limiting funds available for appropriations. Under the status quo, the entire earnings reserve may be appropriated.
3. It offers improved stability during volatile markets in the year-to-year amounts available for appropriation.
4. It is compatible with the fund's diversified long-term investment strategy of achieving a 5 percent real rate of return over time.
5. It's predictable. Under the status quo, it is not known whether funds will be available for appropriation in any given year.
The governor did the right thing by endorsing the POMV plan for the state's future financial stability. In upcoming months, Alaskans will have the opportunity to weigh in on the proposal. It should not be just the naysayers who speak up.
