My Turn: Reflections of Alaska’s fiscal situation

  • Thursday, September 24, 2015 1:00am
  • Opinion

The other day I was driving past Genoa heading toward Tuscany. Passing Portofino and drawing close to the Cinque Terra, I thought about Hugh Malone, wondering what he would think about Alaska’s fiscal condition and the significant budget problems our state faces.

Malone, a principal architect of Alaska’s Permanent Fund, tragically died in Vernazza, a village nestled in the Cinque Terra, a beautiful stretch of the Italian Riviera adjacent to the Ligurian Sea. While serving in the Alaska Legislature, Malone skillfully and tirelessly worked with Oral Freeman, Jay Hammond and other political leaders to establish the Alaska Permanent Fund.

Malone, more than any other Alaskan, was responsible for ensuring that large portions of the non-renewable oil revenue set to flow into Alaska’s public treasury were saved and protected from wanton spending by the political caste. The genius of Malone, Hammond and others in setting aside a portion of the oil revenue bonanza is reflected in the significant Permanent Fund Dividend each eligible Alaskan receives every year. Without the Permanent Fund, the PFD wouldn’t exist.

Saving a huge hunk of the oil revenues, as conceived by Malone and other forward-thinking Alaskan leaders, wasn’t the seemingly obvious smart move many current residents assume was easy. A number of politicians back in the early 1970’s and more than a few members of the electorate were bent on spending every cent of the eagerly anticipated oil revenue projected to flow from the Prudhoe Bay oil development.

Alaska, a state long on potential but lacking many desired infrastructure amenities, was poised for a spending spree and talk of saving for the future was dismissed by some as unnecessary. Enormous pressure existed to spend on myriad projects and increasing government services.

Setting aside significant wealth for the future and future generations was a task Malone embraced. Hammond and Malone, working in a bipartisan manner, succeeded in the remarkable achievement whereby the Alaska Constitution was amended to establish the Permanent Fund. Few today doubt the wisdom of establishing the Permanent Fund.

As I drove past Vernazza thinking about Malone and his savings vision, I wished he was still with us so I could ask whether Alaska had actually saved enough of the non-renewable oil revenue. Malone was a thoughtful and caring politician who had a strong desire to help individuals, and he willingly sought to increase government services when necessary. At the same time, he had a well-developed sense of how capricious politicians could be and he wasn’t convinced the political caste was clairvoyant when making what are sometimes called “public investments.” As a result, Malone expressed concern about spending too much and he acted to save some of the new wealth, as prudent a step as any politician in Alaska has ever demonstrated.

But did we save enough, I found myself asking the mythical Malone? The answer came as I looked out on the sparkling waters where Malone died. Perhaps we should have saved more, but we did the best we could under the circumstances, and that will have to do.

We Alaskans are fortunate to have significant financial resources that will mitigate the now obvious financial crunch we face. There are no magical solutions that will allow us to collectively or individually avoid reconciling the fact that oil revenues are much diminished and that the amount of oil being pushed through the Trans Alaska Pipeline is rapidly decreasing as a result of the inevitable reduction in oil production.

I am confident Malone would first call for the protection of the Permanent Fund. It is, or at least should be, permanent and available for future generations. Malone, being the sensible political leader he was, would also embrace moving in a forthright manner toward establishment of a sustainable and balanced budget.

Each and every one of us fortunate to live in Alaska need to take a hard look at the current unsustainable difference between revenues flowing into the state’s General Fund and the demand for spending from the same fund. The delta between the revenues flowing in and appropriations made from the General Fund is huge for a small population state like Alaska. Balancing our budget will require a thoughtful combination of cuts to government and some tax increases. We can neither cut our way to a balanced budget any more than we can achieve a balanced budget only by enacting new tax augmentation measures. Both are necessary and must be part of any sustainable budgetary solution

In the end, if we could ask them, I believe Malone and other visionary leaders from our past would say the only way to solve the current fiscal problems is by listening to all concerned citizens and then acting together in the best interest of the entire state and for future generations. That is exactly what Jay Hammond, Hugh Malone, Oral Freeman and other leaders did in the past, and that is what is required of all us now.

• Joeseph W. Geldhof is a lawyer who has resided in Juneau since 1979. He was counsel for Hugh Malone on occasion.

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