Daily Archives: May 19, 2012

Alaska Fiscal Policy| Where We Have Gone Wrong

In March, the University of Alaska Anchorage’s highly respected Institute of Social and Economic Research (“ISER”) published a paper entitled “Managing Alaska’s Petroleum Nest Egg for Maximum Sustainable Yield” (.pdf). The paper is the continuation of an effort started last year (.pdf) by ISER’s Scott Goldsmith to determine the appropriate level of annual state government spending, if the objective is generally to maintain a consistent, inflation adjusted level of state spending over time.

The purpose of ISER’s effort is much the same as retirement planning for an individual. In retirement planning the goal is identify the maximum level of annual spending from an individual’s retirement account that will allow the generation of a relatively consistent stream of annual income for the rest of the retiree’s life. The ISER study is designed to determine the level of spending that is prudent in order to ensure that future Alaskans continue to receive the same level of government goods and services that are available to current Alaskans.

ISER’s terminology – “maximum sustainable yield” – is derived from the Alaska Constitution. Article VIII, Section 4 of the Alaska Constitution provides that “Fish, forests, wildlife, grasslands, and all other replenishable resources belonging to the State shall be utilized, developed, and maintained on the sustained yield principle, subject to preferences among beneficial uses.” Continue reading