Investor Presentaiton
Alaska's Fiscal Challenge
Alaska faces a long-term fiscal problem. As Alaska's population grows, demand for State
services will inevitably grow. At the same time, the oil revenues which have paid for most
State services are likely to decline as oil production declines-regardless of what happens to
oil prices.
Alaska's investment earnings from the Permanent Fund were growing until the recent
financial crisis. These investment earnings could in theory become a new "permanent"
source of state revenues. But Alaskans have come to expect that those earnings will be
used to pay for Permanent Fund dividends—rather than for government.
Alaskans pay significant property taxes and/or sales taxes to local governments which help
support both local governments and their local schools. But Alaskans have been unwilling to
accept broad-based taxes—such as income or sales taxes-to pay for the costs of State
government. Basically, we get our State government for free (and we expect it to send us
money in the form of dividends).
Eventually, when oil revenues decline, Alaskans will face a difficult choice. Either we will
have to reduce spending, impose broad-based taxes on Alaskans, use some or all of the
Permanent Fund earnings to pay for state expenditures rather than dividends—or spend from
the capital of the Permanent Fund (which would require a constitutional amendment). Most
likely we'll do some of each.
No other state has both high oil revenues and a huge Permanent Fund. Most States would
love to have Alaska's fiscal problem. It is not an economic challenge but a political challenge?View entire presentation