EDITOR, Daily News:
Recently, the Alaska Legislative Fiscal Policy Working Group was established with the goal of making progress towards a long-term sustainable fiscal plan for the state, protecting the Alaska Permanent Fund, and providing an annual dividend for generations of Alaskans to come. It consisted of eight legislators — two from each caucus within both the House and the Senate. The group met 35 times over two months, and last month they released their final report. Their work solidified the baseline assumptions and possible paths forward for our fiscal future. Their recommendations were:
1. Restructure the permanent fund to be a single, constitutionally-protected account with draws limited by 5% of the fund’s market value (POMV).
2. Constitutional certainty for the dividend.
3. A new dividend formula, based off the POMV draw.
4. A healthy capital budget.
5. New revenues of $500 million-$775 million; the type(s) of additional revenue are not specified.
6. Budget reductions of $25 million-$200 million over multiple years through structural and statutory reforms that maintain levels of service but improve efficiency.
7. Revise spending limits.
8. One-time fiscal measures over the next few years as a ‘transition period.’ Those measures may include:
a. a one-time transfer of $3 billion over the annual 5% POMV draw from the permanent fund to bridge budget deficits, or
b. a dividend ‘stairstep’ that starts with a modest dividend and increases to the new formula full dividend amount after adopting the above solutions.
9. The comprehensive solution must prove resilient to fiscal stress and able to survive market volatility and the varying price of oil.
One of the most important points is the very first recommendation to limit the fund draw to 5%. I am both thankful for and proud of the work done by the Working Group, and agree that the above measures are necessary for creating a comprehensive fiscal solution, but I believe that capping and enforcing the POMV draw to 5% is most important and necessary to protect our permanent fund far into the future.
The $82 billion value of the permanent fund is almost entirely due to prudent one-time transfers, inflation proofing and smart investing. We are no longer an oil state: less than 25% of the value of the fund comes from royalties. Instead, we are a state with an incredible investment portfolio to rely on. However, if we overdraw the fund today, we are missing out on billions of dollars of investments and growth in the future. In my opinion, numbers 1 and 8a are incompatible, and, because number 1 is vital, I much prefer number 8b as the one-time option moving forward.
I would like to hear your thoughts on the recommendations above. You can email me any time at Rep.Dan.Ortiz@AKLeg.gov or call my office.
REP. DAN ORTIZ
House District 36