Democrats Introduce Measure to Turn Windfall Profits into Endowment
Constitutional Amendment would secure savings, provide earnings to invest in Alaska
JUNEAU – Today, Representatives Berta Gardner and Mike Doogan (both D-Anchorage) introduced a constitutional amendment to turn part of the state’s savings into an endowment and put the earnings of the fund to work meeting Alaska’s needs and inflation-proofing the fund. Windfall state revenues at high oil prices would feed the principal of the fund, which could not be touched by the Legislature.
If approved by a majority of Alaskans, the measure would turn the Constitutional Budget Reserve into an endowment much like other large-scale endowments such as the Ford Foundation and Yale University. Any additional revenue from oil taxes at high prices would go directly into the principal of the fund, bypassing the Legislature and eliminating any temptation to spend and not save those public funds. Instead of allowing the Legislature access to the entire account with a super-majority vote as is currently the case, lawmakers could spend no more than 5% of the fund's value each year.
“Placing the bulk of this fund, and any new windfall tax revenue from high oil prices, off-limits to legislators ensures Alaska’s savings will always be there,” said Rep. Doogan. “And capping what goes into the general fund each year will force us to keep annual spending under control.”
“This proposal guarantees Alaska’s savings from a non-renewable resource, and it spins off a renewable stream of income to help meet the state’s needs year after year,” said Rep. Gardner.
The Constitutional Budget Reserve currently holds around $10 billion which would spin off approximately $500-600 million each year after inflation-proofing the principal. Both numbers would likely increase as investment earnings and additional oil tax revenues are deposited. At current oil prices, around $1.5 billion of windfall revenues would go directly into the endowment each year as permanent savings.
The state also holds a Statutory Budget Reserve that is easily accessible for unexpected emergencies. That fund currently has $1.5 billion. Former Representatives Harry Crawford (D-Anchorage) and Ralph Samuels (R-Anchorage) each proposed this idea in previous legislatures. In 2008 it passed the House of Representatives with broad bi-partisan support.
“The State’s in a good position now to plan for the future, and if we act now, this proposal can be the first step toward a long-term fiscal plan,” said Rep. Gardner.