Opinion: Alaska has made progress toward fixing its fiscal situation.

Has been updated: 2 by the time release date: 1 1 day ago

Alaska’s fiscal outlook is not entirely negative. As a volunteer board member of the Alaska Municipal Bond Bank since 2008, I have worked with all major credit rating agencies including Fitch, S&P, Moody’s, and Kroll. The primary purpose of these interactions was to secure the most favorable and realistic credit rating possible. Achieving this goal is critical as it directly contributes to minimizing interest rates on general debt. This fiscal prudence directly benefits Alaskans, especially those in the communities and local health organizations that rely on bond banks.

Moreover, a high credit rating doesn’t just mean lower interest rates. Provides a thoroughly analyzed perspective on Alaska’s future economic prospects. This analysis is a valuable tool for investors considering allocating large capital investments to national projects. Therefore, maintaining a good credit rating is a strategic tool that supports both Alaska’s fiscal responsibility and economic development.

I am concerned about how the state’s fiscal and economic outlook is perceived through static, mandated fiscal reports such as the 10-year forecast. A significant source of the problem lies in the rigidity of some laws requiring static reporting that does not take into account reality. Alaska Statute 37.07.020(b)(2) requires the state to “balance the source and use of funds held while providing essential state services and protecting the economic stability of the state.” This will serve as a guideline for the 10-year forecast. Additionally, AS 37.13.145(b) states: “At the end of each financial year, a company shall transfer 50% of its distributable income from its profit reserve account to the dividend fund established under AS 43.23.045” Under AS 37.13.140. Promotes projections of “statutory” permanent funding allocations over a 10-year forecast. As a result, 10-year forecasts are grossly misleading, especially given what has happened in the past decade.

In 2016, Gov. Bill Walker’s shocking decision to veto half of the funds appropriated for Permanent Fund dividends approved by the state Legislature had significant legal and financial implications. . Sen. Bill Wierechowski filed a lawsuit challenging the veto on the grounds that it violated the constitutional amendment that established the standing fund. He insisted that the money earmarked for Permanent Fund dividends be immune to the governor’s veto. However, Anchorage Superior Court Judge William Morse upheld the governor’s veto, saying that overriding the governor’s veto would require explicit, formal legislative action.

Absent a change in statute, the Governor would be required to include “full” dividends in state budget projections, a requirement that constrains the presentation of a balanced budget that meets the requirements of AS 37.07.020. Therefore, it would be prudent for Congress to consider amending the statutory language governing the language of Endowment Fund revenue sharing. These amendments would give governors greater latitude to develop more realistic budget projections that are consistent with a projected balanced budget. Given the need for the Governor and legislators to balance actual revenues and spending, this change is critical to fostering transparent communication with the public about the state’s fiscal outlook.

Alaska’s current financial situation must be realistically presented to the public in light of the past decade. The state’s unrestricted operating and capital budget in 2013 was $7.9 billion, he said, decreasing to $4.5 billion in 2017 and 2018 and estimated to be around $5.2 billion by 2025. This means that unrestricted income has declined by a significant 34% over the past 10 years. As a result, states are struggling to meet their operational needs pursuant to AS 37.07.020(b)(2) and are unable to pay “full” dividends in line with current statutory language (AS 37.13.140). you can’t.

The reality is that past legislatures and governors have ultimately made significant cuts over the past decade, adopting market-to-market-to-market (POMV) rules in 2018, implementing them in 2019, and targeting spending through 2021. That is 5.25%. And then 5%. As a result, reliance on oil revenue projections has decreased from more than 80% of past state budgets to 16% of the state’s projected total budget in 2025 and 33% of the state’s unrestricted general fund budget in 2025. POMV has proven to be highly effective in stabilizing state revenues over the past five years, combining a profit reserve account and a corpus account to provide future legislators with “up to” a 5% tax. The levy would further secure Alaska’s fiscal future.

Alaska’s current fiscal situation reflects a stable situation, due in part to deep budget cuts and an annual cap on state spending growth of less than 2%. This fiscal discipline is evident when comparing state government spending of $3.95 billion in fiscal year 2019 to the projected budget of $4.32 billion for fiscal year 2025. Additionally, the state’s fiscal health is strengthened by fully funding the Public Employees’ Retirement System and Teachers’ Retirement System obligations.

Additionally, the state’s total debt service to maturity, including school debt repayments, is less than $1.5 billion. Notably, over 71% of this debt is scheduled to be repaid within the next 10 years. This scenario highlights the state’s commitment to effectively managing fiscal debt and maintaining a strong fiscal framework.

Discussions about public finances and spending priorities are important elements of good governance. Annual discussions are key to producing accurate, realistic and transparent financial reports and forecasts. It is important that financial documents comply with both the letter and spirit of state law. My recommendation is for the Congressman to amend the statute related to Permanent Fund dividends this session to improve the accuracy of his 10-year projections that accompany the related financial reports.

Luke Wells He serves as Chairman of the Board of Directors of the Alaska City Bond Banking Authority. He previously served as senior director of business development and strategic partnerships for the Alaska Native Tribal Health Consortium and before that as vice president of finance for the Arctic Slope Indian Association.

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