Opinion: A gift from the past

When the dust finally settles on Gov. Mike Dunleavy’s budget for the 2020 fiscal year, our state leaders may feel the need to dip their toes into the Earnings Reserve Account of the Alaska Permanent Fund.

The budget Dunleavy inherited from Gov. Bill Walker included a $1.6 billion deficit. Dunleavy, his people and state department heads are reworking the numbers to come up with a right-sized government that gets the job done.

They may or may not be able to eliminate that deficit, but if they can’t they should not hesitate to draw something from the Earnings Reserve Account to pay it off. Previous administrations have been reluctant to touch that account because it is the source of our Permanent Fund dividend checks.

Such caution is appropriate but irritates some of us who voted in 1976 to establish the Alaska Permanent Fund as a way to put away a portion of our oil money to pay the future costs of state government. The dividends were something of an afterthought which we all approved in 1980. The obvious problem is that far too many people think of the Permanent Fund only as a way to pay for those dividend checks.

Failure to do so would be a breach of faith with the Alaskans who voted to establish the Permanent Fund in 1976 The purpose of the fund as it was sold to those who voted on it was to save a portion of current oil income for the future cost of state government. And, in case you haven’t noticed, the future has arrived.

Voter approval of the Permanent Fund came after an oil lease sale on the North Slope following the discovery at Prudhoe Bay netted the state $900 million, a pile of money never seen before by the people of this state. But the joy of that bonanza was fairly short-lived because the Legislature blew through that $900 million like it was small change.

After that, Gov. Jay Hammond brought forth the idea of putting away a portion of our climbing state revenues for the future. We bought Hammond’s idea and the Permanent Fund was established in 1976. Today the Alaska Permanent Fund contains about $65 billion, including a principal of about $46 billion and almost $19 billion in the Earnings Reserve. The principal is essentially untouchable and continues to be reinvested by the fund’s board and the Earnings Reserve is theoretically available to be spent by the Legislature to pay the cost of state government.

Since the Earnings Reserve Account also provides our Permanent Fund dividends, legislators have been justifiably hesitant to use Earnings Reserve for anything but dividend checks

Gov. Jay Hammond had a great idea when he proposed the Alaska Permanent Fund. The state was coming into a lot of money from North Slope lease sales and climbing production, but it was obvious even then that the gravy train would not run on forever.

The North Slope is still a great source of revenue for the state of Alaska but the years after the North Slope oil discovery and development were obviously not going to continue indefinitely. The Permanent Fund was established at a unique time in our state’s history and is ready to do its job when called upon.

Past legislatures have dipped heavily into another account, the Constitutional Budget Reserve, funded by large settlements from disputes with oil companies. That reserve is largely gone now, so we may be dipping into our Permanent Fund earnings sometime in the next few years.

Hopefully Governor Dunleavy will be able to trim the budget to something we can afford with current revenues for this year. But if we can’t, the Earnings Reserve Account is there when it’s needed.

So far our governor and the legislature have restrained their spending impulses — with the dividend as an incentive — and Earnings Reserve is largely untapped.

May it stay that way for years to come. Having it there is a marvelous comfort.