How can Alaska fix its fiscal woes? Take the Permanent Fund away from legislators, says Rep. Kreiss-Tomkins

A pair of policy proposals by Sitka Democratic Rep. Jonathan Kreiss-Tomkins seek to force the Legislature to address Alaska’s underlying structural deficit by taking away the state’s last big account of easy-to-spend money: The Alaska Permanent Fund’s earnings reserve account.

Kreiss-Tomkins presented the proposal to the House Ways and Means Committee on Tuesday, noting that the state has already burned through billions of dollars in savings instead of tackling the politically tough questions needed to address the deficit. He said as long as there’s still easy-to-spend money available—like the Alaska Permanent Fund’s earnings reserve account—he worries it’ll continue while legislators struggle to even debate long-term fixes like taxes, cuts and changes to the dividend.

“The default plan that we, the Legislature, have is to spend down our savings. That’s what’s happened the last seven years, and I have every reason to believe that that’s what we as an institution will do going forward. Everybody loses,” he said, noting that spending down state spending endangers everyone’s priorities whether they’re education, state services, dividends or anything else. “We all lose. All of those priorities for us lose. It’s just the worst of all scenarios. What this language is meant to do is just say, ‘OK, we can all agree that regardless of what your priorities are, the absolute dumbest thing we can do is spend down our savings and, gosh darn it, let’s stop doing that right now so we can respect all of our priorities and hash out what those priorities are in future years.’”

The pair of policy proposals are:

• House Bill 165, which would move more than $4 billion from Alaska Permanent Fund earnings reserve account, which just needs a majority vote to spend, to fund’s corpus that’s protected from spending by the Alaska Constitution. It’d be a similar move to the Legislature’s action last year that saw about $5 billion transferred out of reach of legislators, and would also serve to help with the inflation-proofing of the fund’s corpus.
• House Joint Resolution 1 proposes a constitutional amendment that would transform the Alaska Permanent Fund into an endowment model where the whole thing would be out of reach of legislators. It would make only the 5% annual percent of market value of the fund available for legislators to spend as they wish, with some split between services and the dividend. It’s a similar model to the spending rules already in place on the fund but could not be ignored—as legislators are considering doing this year—with a majority vote. Constitutional amendments require a two-third vote of each chamber to be placed on the ballot for approval of voters.

Saving money in the Alaska Permanent Fund also helps the state’s financial picture in the long-term by spinning off continued investment income. Any overspending from the account reduces the overall account, shrinking the investment revenue and therefore increasing the future deficits.

Asked about one of Alaska’s biggest political flashpoints—the Alaska Permanent Fund dividend—Kreiss-Tomkins said he’s neutral on whether or not it should be included in the constitutional amendment. Gov. Mike Dunleavy has proposed a similar constitutional amendment to HJR 1, HJR 7, that would include the dividend in the constitution but leave the split between state services and the dividend up to the Legislature to decide.

He said his main goal in putting forward the legislation is because he sees broad agreement on the need to protect the Alaska Permanent Fund from being spent like other now-drained state savings accounts.

“I’m all for whatever might get the two-thirds vote from both bodies,” he said.