With all due respect to those on both sides of the debate, at this point oil reform is only the second most important issue to Alaska’s future. Right now, reforming Alaska’s fiscal policy should take priority.
Alaska is at a crossroads. As I have explained elsewhere on these pages, continuing the current levels of state spending will doom future Alaskans to a lower standard of living, either as a result of reduced state goods and services or the need to implement state income, sales and property taxes to sustain them. As current spending rates, oil reform may delay that result, but it will not change it.
On the other hand, changing to a sustainable budget policy will ensure that both current and future Alaskans continue to enjoy roughly the same level of state goods and services, virtually in perpetuity, without the need to impose any tax related burdens on future generations. That can occur with fiscal reform, regardless of the outcome of oil reform.
Don’t misunderstand me, there are many, many reasons why Alaska needs to reform its oil policy as well. As I have explained elsewhere, doing so will increase long term production, which will increase Alaska’s wealth and, combined with fiscal reform, increase the overall level of government support both for future and current Alaskans. That is an important goal and one which deserves a great deal of attention.
But it — oil reform — is not more important currently than fiscal reform. Unless we change Alaska’s approach to government spending now, while revenues still exceed sustainable spending levels, current Alaskans will leave future Alaskans in much worse condition than the current Alaskans found it. We will have failed in our responsibility to pass along to future generations at least the same — if not a better — life than what we enjoyed.
There are not many candidates in this election who understand that fundamental truth, much less have a history of successfully dealing with it.
One who does — and as a result, whose election is important to the effort to achieve fiscal reform — is Don Smith, a candidate for State Senate District H.
Admittedly, not everyone is a fan of Smith and even those who are, sometimes note some rough edges. For example, in its recent candidate ratings, Prosperity Alaska, which provides a “thumbs up” or “thumbs down” on candidates from a “business perspective,” said that Smith’s “positions on issues and candidates are unpredictable” and rated him a non-committal “shrug.”
On the most important issue facing the state, however, Mr. Smith is unwavering. In his response to Prosperity Alaska’s request for his stance on Alaska fiscal policy, Smith responded clearly —
“Current spending levels are unsustainable. The operating budget needs to be trimmed and the capital budget needs to be reduced substantially.”
More importantly, Smith is one of very few current legislative candidates who have “been there, done that,” in terms of fiscal reform.
While on the Anchorage Municipal Assembly in the early 1980’s, Smith became concerned about the growth in municipal spending and began a petition for a charter amendment to limit the growth of municipal budgets. The proposal did so by putting a cap on tax rates.
Passed in 1983, the so-called Tax Cap has limited municipal spending levels since, in the process providing fiscal certainty to Anchorage businesses and likely saving Anchorage property owners significant sums over the years.
That is similar to a potential approach I have suggested on these pages to deal with state fiscal issues. See “A Statute and a Pledge: A Potential Approach for Addressing Alaska’s Coming Fiscal Crisis” (Jun. 17, 2012).
The next two years are critical to Alaska’s future. As the University of Alaska’s Institute of Social and Economic Research has concluded, “[t]he fiscal burden [on future Alaskans] will grow” every year that Alaska spends above sustainable budget levels. The last two years, the Legislature and Governor have approved budgets totaling nearly $3.5 billion above sustainable levels. That is $3.5 billion (or annual revenue stream of $245 million at a 7% return) that has been taken out of the pockets of future Alaskans, solely to benefit current Alaskans.
Future Alaskans cannot afford a continuation of this policy. As I put it in another recent piece published recently in the Fairbanks News-Miner, Alaska’s fiscal future is now.
Don Smith has the understanding and, in significant ways, an experience level unique among the candidates to help turn Alaska’s spending ship away from the shoals. I would urge your support for his efforts (and if you are of such a mind, a contribution — here — to his campaign).