When Gov. Bill Walker announced his plan to cut the Permanent Fund Dividend and restructure the permanent fund for government spending, I sought advice from Vernon Smith, PhD, and Nobel Laureate.
Smith is an expert economist, who served from 2003 to 2006 as the Rasmuson Chair in economics at the University of Alaska Anchorage. I recalled his praise for the permanent fund model in Gov. Jay Hammond’s last book, “Diapering the Devil: A Lesson for Oil Rich Nations.” Since he lived in Alaska, I hoped he would discuss his evaluation of Walker’s fiscal plan.
Smith received the Nobel prize in economic science in 2002 and is now a professor at Chapman College in Orange, California. I was delighted that he was interested in discussing Alaska’s fiscal problems with an Alaskan without a fancy title. He replied to my email questions, saying he would gladly give permission to share his comments and signed off his first email saying, “I love Alaska and Alaskans.”
Here’s one of my questions to Smith and his comments, with permission: “Do you think Alaska needs to adopt Gov. Walker’s fiscal plan with a PFD cut and fund restructure to pay for government?”
His answer is vitally important for Alaskans to know: “If this bill passes, I do not see that it will do anything to solve Alaska’s long run problem of developing new sources of wealth creation and will likely make Alaskans worse off. Easy money spoiled and undermined clear thinking in the early days of the permanent fund when the people’s responsibility in the form of an income tax was repealed. And now, hard times are muddying clear-sighted attention to long-term problems.”
“With the lion’s share of oil revenue received by government for spending in the past (more than 10 times the dividend payout), it has failed to advance that agenda. How can reducing its budget losses now at the expense of future dividend payouts to the people, improve, rather than worsen that performance?”
“Alaska has important assets besides the declining value of its developed crude resources at Prudhoe, etc. As an alternative to the state taking from the citizen’s fund account, they could auction title (or long-term lease rights) to these assets: railroad, airport, ferry. If Alaska operating assets are sold, and some of state land sold, they would be unlocked and available for generating new income. Consolidating agencies with billions in assets might be another revenue source.”
“Where should the proceeds go from the sale and consolidation of assets? These are your assets as Alaska’s people. Deposit them to the people’s account, the permanent fund. This fund is your jewel, add to it and guard it.”
“Let the state cut the budget, get a fair share of their oil production, invest in the permanent fund, and protect the current PFD formula. If needed, reinstate an income tax which disciplines government spending by passing it through the eye of the needle of voter scrutiny.”
“The Alaska permanent fund was envisioned as the citizen’s share of the oil resource and that should not be surrendered lightly. Certainly not without the consent of and vote of Alaskans. This plan (SB 128) gives the government priority access to what should be the people’s earnings on their assets. The road to hell is well paved by urgent pleas to suspend contractual property rights in the name of crises. Alaskans have the right and duty to use their political power to stop a raid on the Permanent Fund.”
Armed with these facts shared by Smith, send a message to Walker and the legislators to stop the proposed restructure of the permanent fund and PFD cut without a public vote. The only way these reoccuring attacks on Alaskans’ share of assets can be completely stopped is with an Alaska Constitution amendment to guarantee the PFD.
• Juanita Cassellius is an Eagle River resident with a Communications degree from UAA. Dr. Vernon Smith received his PhD in economics from Harvard University.
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