Text of Conference of Alaskans letter

Posted: Sunday, February 15, 2004

February 12, 2004

Fellow Alaskans,

The 55 of us have spent the past three days in Fairbanks at the Conference of Alaskans called by Governor Murkowski to consider the fiscal future of our state and the proper role of the Permanent Fund in that future. We believe there are five basic facts that Alaskans must and do acknowledge.

The Permanent Fund must remain precisely that permanent and must be protected.

Permanent Fund Dividends provide the crucial link between the Permanent Fund and its true owners, the People of Alaska, and so they too must continue.

The fiscal crisis facing Alaska is a clear and present danger to the adequate protection of necessary public services.

Alaska must not impose self-inflicted harm. The delegates now believe that Alaska's state spending is inadequate to meet current needs for public education, public protection and many other necessary state services. Too many communities around Alaska, large and small, are already facing desperate decisions.

Alaska needs some kind of standby cash reserve so state and local government services won't have to come to a catastrophic halt if oil prices crash.

With these facts in mind, we have considered and discussed the four questions that Governor Murkowski specifically asked us, and here are what we believe are the best answers to them.

1. Should the use of income from the Permanent Fund be limited by the Constitution to 5% of the Fund's value, as the Permanent Fund Trustees have proposed?

Yes. We must inflation-proof the Permanent Fund in order to keep it and the Permanent Fund Dividends (PFDs) from evaporating away in the future. The "percent of market value" (POMV), as suggested by the trustees will put inflation-proofing into the Constitution, instead of leaving it to the Legislature's discretion. POMV is a technical change in determining how much money from the Fund is available, but it has nothing directly to do with the choice of using it for Dividends or spending it on anything else. That's the next question.

2. Should a portion of the income of the Permanent Fund be used for essential state services, such as education?

Our answer here is "yes, but ... ." There are two conditions to our endorsement. One, dividends must be paid out first under POMV. Only what's left over could be used for essential state services. Two, the delegates to the Conference of Alaskans recommend that the governor and legislature take action to balance the state's revenues and expenditures, including but not limited to, consideration of a personal income tax, other broad-based taxes and other alternative sources of income.

3. Should the use of the income of the Permanent Fund for dividends and possibly for

other purposes be determined annually by the Legislature, as is currently the case? Or should it be dedicated in the Constitution?

A reasonable percentage of the Permanent Fund money available under POMV should be constitutionally dedicated to PFDs in order to make them "permanent" like the Fund itself. All other uses of the remaining Permanent Fund money should be left for the Legislature to appropriate, since it is impossible for this generation to predict what the needs will be for the next.

4. Should the state maintain a minimum balance in the Constitutional Budget Reserve to stabilize state finances against fluctuations in oil production or prices?

Yes, a prudent amount should be in reserve at all times, for two reasons. We can't afford to send home all the police, firefighters, teachers or other critical personnel because the state treasury is empty due to something unforeseen. It is critical that a prudent amount be retained in a Constitutional Budget Reserve (CBR) to stabilize state finances against fluctuations in oil production or prices. This is necessary to maintain the state's very good credit rating which will save millions of dollars in the future. Therefore, if oil production is interrupted or prices fall, so that we need to draw the CBR below the prudent balance, the state needs a plan to refill it back to that level as soon as possible.

We have been honored by the presence and words of former Governor Jay Hammond during the Conference of Alaskans, and we applaud his continuing passionate dedication to protecting the Alaska Permanent Fund and building a strong fiscal future for Alaska.

We have been honored by hearing from hundreds of Alaskans during the course of the Conference of Alaskans, and we thank them for their contributions.

It has been an honor to answer the call of Governor Murkowski in his quest to address issues critical to Alaska. We commend his willingness to bring together this diverse group of Alaskans and join him as we look toward the future of Alaska together. We acknowledge the tremendous staff time put in by both the Administration and the different departments within the Administration, and by the University of Alaska and its staff.

These were challenging discussions with no easy answers. We sincerely believe they are the best answers available for all Alaskans as a whole, and we know they are superior to the "easy" answers. We have tried our best to represent the interests of all Alaskans, and we hope each of you will take up where we have had to leave off. It is time to act. Thank you for the honor of representing you.



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