Current weather

  • Clear sky
  • 12°
    Clear sky
  • Comment

What others say: Paying down debt the right course to follow

Posted: December 9, 2013 - 4:59pm

Alaska is on an unsustainable financial track if it doesn’t adjust its spending and liabilities.

The unfunded pension liability for public employees and teachers’ retirement systems in particular stands at $12 billion. The state currently makes annual payments of $600 million.

The Alaska Retirement Management Board has proposed Gov. Sean Parnell direct $2 billion toward the pension liability over the next four years. Gov. Parnell has proposed $3 billion, which the board supports. Such an injection would reduce annual payments to $500 million, preventing the number from increasing to more than $1 billion annually. It would save the state between $374 million and $424 million per fiscal year, according to the state.

The liability affects the comfort level of bond rating agencies, which could compromise the state’s ability to bond. Governments bond for capital projects.

If the rating agencies are concerned with the pension liability, then Alaska must be attentive to. It also should be keen on funding the pensions and removing the debt. In addition, if it cannot afford its current pensions, then it should honor what it has promised and adjust to what it has the wherewithal to support financially, especially as Alaska’s oil production, which is Alaska’s main revenue source, is declining along with the price per barrel.

Gov. Parnell and the Legislature adopted an oil-tax cut in the most recent legislative session. He expects oil revenue to be about the same as the old tax system because of lower oil prices. But, if prices increase, then the revenue would, too.

Legislators and others opposed to last session’s oil-tax cut support an initiative expected to be on the 2014 election ballot. The initiative would invalidate the new tax.

It won’t be until well after that election that it becomes apparent whether the new tax had the desired effect of reducing the revenue decline anticipated under the old tax.

Alaska simply has to deal conservatively with its finances regardless of which tax structure is in place. It already expects to depend on its $16 billion in savings to maintain state government in years to come, and it cannot exist on reserves forever. Reserves will expire, too, if not replenished.

Alaska, with its oil wealth, can look at other states in serious financial straits and be relieved not to be in their situation at this time. But it cannot remain confident it won’t be in a similar situation if it doesn’t deal with its pension liability and revenue — the latter being addressed with the tax change.

At the same time, it must not allow the state to disintegrate as a desirable place for economic development, which means building and maintaining infrastructure required by business and industry.

The track ahead looks like one with less capital-project spending and more paying down debt. That’s as it should be. First, Alaska pays for what it has already bought. Then, it can buy new stuff. That is the way to a long-standing, economically sustainable state.

— Ketchikan Daily News,

Dec. 7

  • Comment

Comments (2) Add comment
ADVISORY: Users are solely responsible for opinions they post here and for following agreed-upon rules of civility. Posts and comments do not reflect the views of this site. Posts and comments are automatically checked for inappropriate language, but readers might find some comments offensive or inaccurate. If you believe a comment violates our rules, click the "Flag as offensive" link below the comment.
RaySouthwell
1054
Points
RaySouthwell 12/10/13 - 05:22 pm
0
0
Public Employees-Teachers

"The liability affects the comfort level of bond rating agencies, which could compromise the state’s ability to bond. Governments bond for capital projects."

I don't get it. Why don't we see news stories on the compounded interest we pay out on capital projects. All we read about are the unfunded public employee and teachers retirement. How about unfunded compounded interest.

Public Employees and teachers- Consider this. Why should we fear bond ratings with $16 billion in our rainy day fund? I know, all we need to do is to observe what happened to the two largest municipalities ever to go bankrupt, Detroit and Jefferson County Alabama. Detroit's credit rating dropped so far that the banks now want the future 25 years in interest payments now. It looks like the cities retirees will be paying. And Jefferson County rating dropped to a point where their interest rate was 30% pushing them into bankruptcy.

Alaska could do as the private banks do. Establish a bank. Only this time make it a public bank. I like the name Bank of Alaska. Deposit our $16 billion into the bank and create the credit up to ten times the deposit. Tell the bond rating agencies to take a hike. Use this newly created money and use it for capital projects. Now the interest payments would go back to Alaska instead of those banks too big to fail or jail. I think a public bank of Alaska would give us a much better rate than those private banks. Wouldn't it be great to use money for the public good. North Dakota is the only State that does it that way.

RaySouthwell
1054
Points
RaySouthwell 12/10/13 - 05:49 pm
0
0
Detroit

To better understand Detroit's bankruptcy please read expenses section here under this publication.

http://www.demos.org/publication/detroit-bankruptcy

Public banking could stop it all. Bank of Alaska.

Back to Top

Spotted

Please Note: You may have disabled JavaScript and/or CSS. Although this news content will be accessible, certain functionality is unavailable.

Skip to News

« back

next »

  • title http://spotted.peninsulaclarion.com/galleries/321268/ http://spotted.peninsulaclarion.com/galleries/321253/ http://spotted.peninsulaclarion.com/galleries/321248/
  • title http://spotted.peninsulaclarion.com/galleries/321243/ http://spotted.peninsulaclarion.com/galleries/321208/ http://spotted.peninsulaclarion.com/galleries/320593/
  • title http://spotted.peninsulaclarion.com/galleries/321173/ http://spotted.peninsulaclarion.com/galleries/321163/
My Gallery

CONTACT US

  • 150 Trading Bay Rd, Kenai, AK 99611
  • Switchboard: 907-283-7551
  • Circulation and Delivery: 907-283-3584
  • Newsroom Fax: 907-283-3299
  • Business Fax: 907-283-3299
  • Accounts Receivable: 907-335-1257
  • View the Staff Directory
  • or Send feedback

ADVERTISING

SUBSCRIBER SERVICES

SOCIAL NETWORKING

MORRIS ALASKA NEWS