Skip to main Content

Keep the PFD, but then let's pay our way as Alaska citizens

  • Author: Clem Tillion
  • Updated: June 25, 2016
  • Published March 8, 2016

Alaska spends roughly four times more per capita on government than any other sister state, but no other state tries to govern an area so vast with so few people. I am told that our non-government paychecks (for those in the oil, fisheries, timber, tourism, agriculture and mining industries) amount to about 24 percent of those employed while government paychecks, including federal, state and local, add up to 36 percent.

Yes, we can cut a great deal and should. However, sending 20,000 people down the highway will not balance the budget and could well put Alaska into a recession.

From the beginning of our oil wealth, those we hired to advise us regarding the wise use of the funds all pretty much sang the same tune. Invest, but do not spend bonus and royalty money. For, as they put it, spending that money is like selling a few acres of your farm. Unless invested in a way that makes a steady income, the day will come when the farm will be too small for the crops alone to feed you.

As one put it, "To consider oil as a permanent part of your economy is to court disaster." Oil by its very nature is but a temporary benefit for your state. A hundred years from now the only person who might see Prudhoe Bay will be a hunter looking for a caribou.

If we put our bonus and royalty into money-making investments along the lines of our Permanent Fund, we will convert a non-renewable resource (oil) into a renewable income-producing source that does not go away when the oil is gone. No matter how rich the mine or how productive the well, the day will come, as in Dawson City or Kennecott, when its existence is only a memory.

When I was a freshman legislator, Earl Hillstrand, an old hand who had been chairman of the last Territorial House Finance Committee, was the first voice I heard. His goal was to lock up as much of our oil revenue as possible to keep the Legislature from hiring a large number of people and giving out retirement benefits that taxes alone could not support when the oil was gone.

After the Prudhoe Bay oil discovery and a $900 million windfall landed in our laps, we set aside $100 million in a fund, the earnings of which would support a longevity bonus for our old timers. In this way, the Legislature would not have to dig down to fund it.

That fall, in 1970, Bill Egan won back the governor's seat. When the next Legislature came back to Juneau, we still had the votes for the Longevity Bonus but not for the first Permanent Fund. A spending spree had already accounted for all that money. So those of us who wanted to save something went to the people. By initiative in 1976, they forced the Legislature to put at least 25 percent of bonuses and royalties in a Permanent Fund. I only wish we had put 100 percent in the fund, but politics is the art of the possible.

When they hit oil in the North Sea, Norway did it right. They put all their oil money in their Petroleum Fund. Today they have over $1 trillion in that fund and the highest standard of living in the world.

Last month while in Juneau for the annual meeting of the International Pacific Halibut Commission, I was asked, "If you had total power, what would you do at this time?"

Well, I have never had total power, but I read history. I have been a skipper since I was 28, so I can dream. The same year I sat for my Coast Guard license, a young lady ran away from her folks and after I put a gold band on her finger and we moved into a two-room log house with no sink, let alone running water or electricity. Shortly thereafter, she took my checkbook away and said, "You catch the fish. I will take care of it from there." So much for a master's license.

But I still can dream of a state that has a future for my children and their children when those with a short-time view and a "let's use it up agenda" retire down south and are gone.

I feel this Legislature will only get good grades if they go the whole 9 yards. Here are my recommendations:

First, re-introduce the state income tax at say 16 percent of your federal tax bill.

Then, a statewide sales tax of 4 percent (kicking it back to those cities and other jurisdictions who already have one). My goal would be to close all loopholes and eliminate deductions. If you buy a car in Oregon, a sales tax would be due in Alaska when you buy your Alaska license.

Regarding the Permanent Fund, do not change the way it is managed, but assess each adult's dividend 6 percent. No cap should be placed on the amount of the dividend. Nor should we fail to fund the inflation proofing. Taxing the dividend is fair. But skip the tricks.

Tourism is a renewable industry, so 6 percent of the gross should do.

The mining industry (operating on state land) should pay 12 percent to the Alaska people who own the resource. Jobs are great, but if we the owners do not get a cut, the minerals are better left to future generations.

As to the fishing industry, Alaska's largest private employer, it once paid its way. But during the "give away" years, half of the raw fish tax was given to cities. The industry should pay its way. I would like to see a 4 percent increase in the form of a royalty so one-quarter of it would go to the Permanent Fund. That way, the little old lady who may not like fish is a part owner and gets some benefit.

When the price of gas went up, the Legislature (imitating the foolishness of its predecessors on the income tax) dropped the motor fuel tax to the lowest of any state. As the cost of highway maintenance did not go down, I would raise it from 8 cents to 40 cents a gallon. The feds help us build the roads, but the maintenance cost is all ours. If you want a good road, then ante up.

I have not even mentioned the state ferry system, a bleeding ulcer if there ever was one.

If legislatures of the past 20 or more years had done the right thing we would not be in this mess, but that is water under the bridge. Now we must pay.

More oil more will be found, enough to keep the pipeline alive, I hope, but the glory days are over. The Yukon Territory still has a wealth of minerals, but Dawson will not boom again.

To have a decent future, all of us must ante up. We owe it to our children.

Clem Tillion is a licensed skipper, has been a commercial fisherman and is a former Alaska state senator. He lives in Halibut Cove.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com or click here to submit via any web browser.

Local news matters.

Support independent, local journalism in Alaska.

Comments