Dermot Cole

Alaska's financial dilemma: A 3-part series

Oil taxes and royalties have been the source of about 90 percent of Alaska’s unrestricted general revenues, but with oil prices flagging and production way down, they’re not coming close to matching state spending. Alaska is staring down a $3.5 billion deficit and the state’s long-term prospects are bleak.

One bright spot: Investment income from state savings has shown remarkable resiliency and has overtaken oil-production taxes in their value to the state. But the deficits will require the Legislature to spend down those savings accounts, eliminating any help they could provide. Only one giant savings account is protected by the state Constitution: the Alaska Permanent Fund.

Veteran Alaska Dispatch News reporter Dermot Cole has written extensively about state spending and the Permanent Fund from his base in Fairbanks. Now, in this three-part series, he examines how we got to this point and what we can do to move forward.

Dermot Cole

Last of three parts

One of the most successful investments in the history of the Alaska Permanent Fund grew out of a chance conversation by two men waiting in line at Gate A18 in Boston’s Logan Airport for a flight to Seattle.

A friend introduced Dr. Larry Corey, the president of the Fred Hutchinson Cancer Research Center, to David Fallace, a portfolio manager for the Alaska Permanent Fund.

“He was a nice guy. We talked about children and life, and where you’re from,” Corey told a reporter for the website Xconomy about his March 2013 meeting with Fallace. “He said he was interested in cancer and cancer therapy.”...

Dermot Cole

Sporadic power problems at the University of Alaska Fairbanks this winter highlight the urgent need for a new power plant, UA President Pat Gamble told legislators Tuesday.

“We had what I would call a major failure already this winter , where we had to evacuate buildings,” he told the Senate Finance Committee. An expansion joint in an underground utility tunnel overheated in late January, leading to a loss of steam heat on a part of the campus with temperatures near minus 40. “In the process of looking at that, we found these two cracks in the boilers,” he said...

Dermot Cole

Second of three parts

For Alaska state government, the richest renewable resource is cash in the bank. A year ago, the Constitutional Budget Reserve, flush with more than $12 billion, earned more than $1 billion for the state treasury.

But continued withdrawals over the next two to three years are expected to devour most of the account and its earning power.

The lost renewable revenue would add up to more than $600 million a year, which is about what a moderate state income tax would generate. In a line that the late Gov. Jay Hammond once employed, “It’s like keeping the home fires burning by feeding it the home.”

The state now expects that earnings from the Constitutional Budget Reserve in 2016 will be about $357 million...

Dermot Cole

Oil taxes and royalties have been the source of about 90 percent of Alaska’s unrestricted general revenues, but with oil prices flagging and production way down, they’re not coming close to matching state spending. Alaska is staring down a $3.5 billion deficit and the state’s long-term prospects are bleak.

One bright spot: Investment income from state savings has shown remarkable resiliency and has overtaken oil-production taxes in their value to the state. But the deficits will require the Legislature to spend down those savings accounts, eliminating any help they could provide. Only one giant savings account is protected by the state Constitution: the Alaska Permanent Fund...

Dermot Cole

FAIRBANKS -- Over a period of six years, hundreds of prescriptions mailed by Alaska pharmacies to veterans and villagers disappeared while in the custody of the U.S. Postal Service in Fairbanks.

Patients waiting for morphine, oxycodone, hydrocodone and other drugs often found themselves in agony because their pain medications failed to show up in the mail, Dan Nelson, the supervisor of the pharmacy at the Chief Andrew Isaac Health Center, told Fairbanks Superior Court Judge Michael MacDonald on March 4.

The thefts stopped about a year ago following a sting operation that led to the arrest of a Fairbanks mail processing clerk...

Dermot Cole

FAIRBANKS — Crews from the Alaska Department of Fish and Game shot 18 wolves from the air this week near Allakaket in the third year of a program to boost moose populations in the upper Koyukuk River drainage.

The wolf-control program is to continue as long as weather permits, said Cathie Harms, a spokeswoman for the department. The goal is to reduce the wolf population to as low as possible in an area of about 1,360 square miles near Allakaket and Alatna to allow more moose to be hunted by humans, according to a report by the Division of Wildlife Conservation. ...

Dermot Cole

FAIRBANKS — With the collapse in oil prices and no plans to raise taxes, the state government is funding about 60 percent of its budget with savings. The next state budget, now under preparation in Juneau, is likely to leave a shortfall in the neighborhood of $3 billion...

Dermot Cole

FAIRBANKS—As Iditarod mushers started west every two minutes Monday morning from an improvised starting line across from the Fairbanks International Airport, each pressed hard on the sled brake, churning up the snow to keep energized dogs from going out too fast.

With the temperature at 4 degrees and thousands of fans lining the chute, the race to Nome enjoyed an energetic sendoff that lasted almost three hours.

Chloe Yourdan, a fifth-grader from Eielson Air Force Base, waved a sign over her head as each musher passed, with the message: “Safe Journey, Good Luck.”

“At first we were going to pick one person, but it was really hard to figure out,” she said, “So me and my mom decided to make a poster for everyone, just wishing them good luck and safe travels.”...

Dermot Cole

FAIRBANKS — How did Doyon Ltd., an Alaska Native corporation with gross revenues of more than $300 million, meet federal rules to launch a "very small business," allowing it to join with Dish Network so the satellite giant could obtain billions in discounts at an auction of wireless spectrum?

Go back to July 29, 1994, when Sen. Dan Inouye of Hawaii introduced his friend, Sen. Ted Stevens of Alaska, as “the granddaddy and author of the auction process” that Congress had set up to allocate segments of the wireless spectrum and bring in money for the treasury...

Dermot Cole

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