CAMPAIGN ISSUE

James Borsetti
Palmer, AK
Sept. 30, 2002

How to fund our State Government is Alaska's prevailing political problem. Before we elect anyone, the people must challenge our present political candidates to constructively address this issue. Rhetoric like possible resource development, taxes only as a last resort and somehow protecting dividend checks just does not cut it. The people deserve detailed proposals. If our candidates do not make solid campaign promises how can we hold them to fulfill them.

I have been trying to magnify the debate concerning our State Fiscal Plan. My efforts have not been fruitless. I have succeeded in receiving some positive feedback, containing some wise advice. I would hope any and all Alaskans would add their comments concerning my modified proposal. After all, that is what debates are all about.

Alaska is an incredibly wealthy State. Our financial challenges can be addressed in a positive manner. We must allow the wealth contained in the Permanent Fund to play a larger role in our economy. We do not need income taxes. If we do start income taxes we take the Permanent Fund dividend program, which is a unique experiment in what I like to call the Capitalism of Belonging, and turn it into a welfare program. The taxpayers will unite and the dividend program will disappear. We must lawfully protect the Permanent Fund dividend program, before it is too late.

The Board of Directors of the Alaska State Permanent Fund Corporation is advising we need to restructure the Fund towards an endowment system. The reasons for this are many and wise. This proposal can be researched on the PFC's web page. The past legislators have not acted on this proposal.

I challenge our present political candidates to champion this restructuring of the Fund as the first step towards our new long-term State Fiscal Policy. Basically, this means the Fund can only make a yearly payout up to but no more than 5 percent of the five-year average market value of the Fund. What this does is inflation-proof the Fund while also helping to establish a predictable balanced year to year payout.

How we appropriate the yearly payout is the second major detail of this Plan. As proposed by the Voice of the Times editorial dated 9-23-02, the Endowment Fund's yearly payout should be split evenly between paying dividends and state expenses. This is an example of the political art of compromise. We all have experienced the benefits of the dividend program. The appropriation for state expenses is how we end the need for state income taxes. Once again our candidates need to show some commitment.

Working with PFC's math projections, this new Fund's formula would have an available payout of 1.25 billion for its first few years. That would mean 625 million for dividends and 625 million towards the state budget. Dividend checks would stay a little bit above 1 thousand dollars for a few years. This is very close to the projected dividend?s amount, if we do nothing. Then, they would steadily increase.

While, the 625 million towards state expenses is more than we could raise through new taxes. The appropriation toward state expenses would mirror the positive benefits of the dividend program, in using dollars earned outside our State, to help our internal economy. The Permanent Fund's balance would grow by close to a billion dollars a year. After a few years, this growth would accelerate.

The last detail I would consider crucial is how the yearly appropriations are lawfully legislated. The constitutional amendment {vote of the people} forming the endowment formula governing our Fund should include that the 50-50 split between dividend and state expenses is lawfully permanent. The legislature would have no power to change this formula. We could include in the amendment that another constitutional amendment {vote of the people} would be necessary to change the percentage split of the payout. This would allow a way to change the formula if desperately needed. Having the amendment's formula control the payout percentage, rather than leaving it up to the legislators, guarantees a lawfully legislated permanent dividend program. It should also help enforce some fiscal conservatism.

If you see the wisdom in this Fiscal Plan or would like to engage in the debate, do it soon as time is running out. Let's make our candidates commit one way or another.