OPINION: Alaska’s “owner state” model and its Permanent Fund are under attack

Updated: 1 an hour ago ^ Published: 1 an hour ago ^

Governor Walter Hickel had a grand vision – that Alaska’s natural resources should be collectively owned and developed in a sustainable manner for the greatest benefit of present and future generations. He believed that this “property state” model could be spread from Alaska around the world to help eradicate poverty. Today, an important pillar of this model, the Permanent Fund, is under attack. As our Legislature completes its work, here are some points about Alaska’s endowment that we should consider.

Alaska’s natural resources benefit everyone. In return for the privilege of developing our resources, we have agreed that private companies are entitled to a fair profit. People benefit through royalties and taxes on resource development paid to the state. The fund transforms our non-renewable oil into sustainable prosperity for all generations. Only 25% of state license fees go into the fund. No other taxes levied on oil production flow into the fund, meaning that the majority of total oil revenue (80-90%) is used to finance public services.

Historically, the fund has only paid for dividends and inflation protection. We have been using the fund to finance public services since 2017. Since then, Alaska has capped annual withdrawals for dividends and public services at a “sustainable” percentage of the fund’s total value (5% of the 5-year rolling average). Exceeding that limit, which some lawmakers are now considering, will weaken the fund and ultimately lead to smaller Permanent Fund dividends, less growth for the Permanent Fund and less money to support public services.

Protecting and expanding the Permanent Fund’s endowment requires both long-term and short-term measures.

The long-term solution is a constitutional amendment that strictly limits the fund’s spending. This would change the current structure of the Permanent Fund, with an income reserve account separate from the fund’s capital, and adopt a structure similar to other large endowments. The Income Reserve Account is not protected from overuse and should be incorporated into the Fund’s capital to protect its value. It has been a standing recommendation of the Alaska Permanent Fund Corporation for years and has never been put to the public for a vote. Failure to do so will have profound consequences for Alaska’s future. Over the past decade, lawmakers have spent tens of billions of dollars from other savings not held in the retained earnings account.

In the short term, our Legislature should exercise discipline by sticking to the 5% spending limit and preserving the real value of the constitutionally protected portion of the fund through inflation proofing.

As oil’s contributions shrink and the fund cannot meet both the public desire for dividends and spending on public services, we should increase the fund, not spend less. Today, the $78 billion fund supports a significant portion of government spending. But a $150 billion fund could potentially fund most of Alaska’s public services forever — something no state has yet accomplished. That’s a dream worth pursuing.

The collective unwillingness to find realistic, long-term solutions to our financial problems will affect us all. Changes that would help Alaska reach its full potential include:

• Spend less: Adopt a more conservative spending limit of 3-4% of the fund value. This is in line with most other foundations around the world.

• Save more: Additional resource royalties and taxes could flow into the fund, including from minerals and fisheries and other state natural resources.

• Diversify income: Generate additional income, e.g. B. an income or sales tax or changes to corporate tax.

Today the future of Alaska will be decided. If we don’t protect the Permanent Fund, we will regret it forever. We have struggles to overcome, but that is no excuse for stealing from the humble inheritance of all future generations.

Governor Hickel believed that the proprietor state was the model and beacon of hope to the world. We can save this model and continue to be a beacon by strengthening our Permanent Fund. If the world’s common resources were used to the greatest possible benefit for all people, there would be no legitimate reason for poverty. We would be on the threshold of a new world.

Jack Hickel, Jon Isaacs, Tom Barrett, Scott Kendall And Yngvil Vatn Gattu Member of the board of the Institute of the North. They are committed to managing community-owned lands and resources to maximize the benefit of current and future generations.

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