Written by Jack Hickel, John Isaacs, Tom Barrett, Scott Kendall, Ingvir Vaton Gattu
Updated: 2 hours ago, Published: 6 hours ago
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Governor Walter Hickel had a great vision for Alaska's natural resources to be collectively owned and developed in a sustainable manner that provides maximum benefit to both current and future generations. He believed that this “ownership state” model could be spread from Alaska to the rest of the world to eliminate poverty. A key pillar of this model, the Endowment Fund, is currently under attack. As our Congress concludes its work, here are some things to consider about Alaska's contributions.
Alaska's natural resources are here for the benefit of everyone. We agreed that private companies are entitled to a reasonable profit in exchange for the privilege of exploiting resources. Citizens benefit from royalties and taxes paid to the state for resource development. This fund turns non-renewable oil into sustainable wealth for all generations. Only 25% of state royalties go into the fund. Other taxes collected on oil production are not input into the fund. This means that the majority (80-90%) of all oil revenues is used to pay for public services.
Historically, the Fund has made payments solely for dividends and inflation protection. Starting in 2017, we began using the fund to pay for public services. Since then, Alaska has limited annual withdrawals for dividends and public services to a “sustainable” percentage of the fund's total amount (5% of the five-year moving average). Exceeding this limit, which some lawmakers are currently considering, would weaken the fund and ultimately result in fewer Permanent Fund dividends, less Permanent Fund growth, and less money to support public services. Become.
Protecting and expanding the Endowment Fund's endowment requires both long-term and short-term actions.
A long-term solution is a constitutional amendment that places strict limits on spending from the fund. This would change the Permanent Fund's current structure of an earnings reserve account separate from the fund's principal, making it similar to other large endowments. Earnings Reserve Accounts are not protected against excessive withdrawals and must be included in the Fund's principal to protect their value. It has been consistently recommended by the Alaska Permanent Fund Corporation over the years, but has never been put to a public vote. Failure to do so will have serious implications for Alaska's future. Over the past decade, Congress has spent tens of billions of dollars from other savings outside of profit reserve accounts.
In the short term, Congress must maintain discipline by adhering to the 5% spending limit and preserving the real value of the constitutionally protected fund through inflation protection.
With oil contributions shrinking and the fund unable to meet the public's appetite for dividends and public service spending, there is a need to build up the fund rather than deplete it. Currently, the $78 billion fund supports a significant portion of state spending. But a $150 billion fund could permanently fund most of Alaska's public services. This is something no state has ever achieved. It's a dream worth pursuing.
A collective reluctance to adopt realistic long-term solutions to fiscal problems will affect us all. Enabling Alaska to reach its full potential includes the following changes:
• Reduce spending: Adopt a more conservative spending limit of 3-4% of fund value. This is in line with most other donations around the world.
• Further Savings: Additional resource fees and taxes may be put into the fund, including on minerals, fisheries, and other state-owned natural resources.
• Revenue diversification: Generate additional revenues such as income tax, sales tax, and corporate tax changes.
Alaska's future will be decided today. If we don't protect the Endowment Fund, we will regret it forever. We have challenges to overcome, but this is no excuse to steal from the modest heritage that all future generations will inherit.
Governor Hickel believed that owner nations were a model and a beacon of hope for the world. We can preserve that model and continue to be a beacon by strengthening our Permanent Fund. If the world's common resources were used for the greatest good of all, there would be no justifiable reason for poverty. We will be standing on the threshold of a new world.
Jack Hickel, John Isaacs, Tom Barrett, Scott Kendall, and Ingvil Vaton Gattu serve on the board of directors of the Northern Institute. They are committed to advocating for the management of commonly owned lands and resources for the maximum benefit of current and future generations.
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