August 09, 2020
Sunday PM

As a resident and longtime financial planner in Alaska I have been concerned for years about the financial problems facing our state. We supported Governor Walker’s approach to solving these problems with a 4-year plan to gradually reduce spending while increasing revenue. This fiscal plan included a reduction in the PFD of about 50% which freed up funding for essential government services rather than spending down our rainy-day savings account. However, the legislature was not able to pass his fiscal plan and did spend down our rainy-day savings account, leaving us today with almost nothing to fall back on, other than the future earnings from the reserve account.

A campaign pledge to pay a “full dividend plus pay back the amounts not paid” by the prior administration was and still is fiscally irresponsible. Governor Dunleavy made and is still using that pledge, and now we are hearing it again from Leslie Becker, running to replace Dan Ortiz in State House of Representatives in the upcoming election.

I have been managing money, providing investment advice and financial planning for over 35 years. Being fiscally prudent has been a practice that is almost ingrained in my DNA. I recognize financial mistakes when I see them. A pledge to pay a “full” dividend during a time as financially challenging as we are now enduring is, in fact, a huge mistake. It will deplete our own economic future of the ability to pay out future earnings to our children and grandchildren. It will, according to the State Office of Management and Budget, cost the Permanent Fund Earnings Reserve account $4.5 billion dollars. This is money that should stay in the earnings reserve account to grow and fund future PFD payments to residents and fund essential government services. Robbing this account now is the wrong thing to do, even if it sounds good and might get a candidate elected. It is unwise, irresponsible and will only make our financial problem worse in Alaska.

As a financial planner, I have often been asked to project the future value over time of a sum of money for clients I advised. Future value assumes a rate of return on investment over a given period of time. Using the standard method of doing this calculation, I project that $4.5 billion dollars would grow to just over $8.06 billion in 10 years at an average annual return of 6% earned. However, if Alaska pays a “full” dividend as is being pledged by Ms. Becker and others, that money will be gone from the reserve account, period. According to the non-partisan Office of Legislative Finance, State of Alaska Department of Revenue, it will cost the state $300 million in future earnings every year if $4.5 billion is spent to pay out “full” dividends. This is funding that we desperately need in Alaska for schools, ferries, roads, public safety, other essential services and future PFD payments to residents. Giving it as a “full” PFD now in order to fulfill a campaign pledge is simply wrong.

The solution to our financial problem is to develop a long-term financial plan, with a sound investment strategy to grow our earnings reserve account carefully and thoughtfully. Dan Ortiz, our current Representative in the State House, has pledged to support a long-term financial plan and a moderate but reduced PFD. Bert Stedman, our current Senator to the State Senate, has likewise advocated a long-erm financial plan. In fact, Both Sen Stedman and Rep Ortiz were instrumental in returning $4.9 billion to the principal of the earnings reserve account in order to avoid spending it. Rather than buying votes, both Ortiz and Stedman have acted in a bi-partisan way to protect Alaska’s best interest. Let’s be smart, Alaska, and not fall for campaign pledges that will further destroy our chances for financial security in the future.

Mary Lynne & Jim Dahl
Ketchikan, Alaska

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Received August 08, 2020 - Published August 09, 2020

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