A recent op-ed published by both the Alaska Dispatch and the Juneau Empire compared Gov. Walker's fiscal plan with the plan advanced for several years by economist Scott Goldsmith of the Institute for Social and Economic Research. Both plans are based on the reality that doing nothing — continuing the status quo — will guarantee fiscal and economic disaster for the state.
Both plans agree that the cornerstone of a strategy to solve our fiscal challenge is to use the sustainable earnings from the past and continuing production of our non-sustainable petroleum wealth: the Permanent Fund earnings and future petroleum revenues. This is what the governor means when he says we must not only balance the budget but put in place a sustainable fiscal structure.
The question is how to do this in a way that is fair to all Alaskans, both current and future generations. Both plans address this question but reach somewhat different conclusions because of differences in the definition of sustainability and differences in the treatment of future petroleum revenues.
Before moving forward with a plan, Alaskans need to understand the consequences of these differences and reach agreement. Because reasonable people can disagree on these issues, as the writer of the op-ed indicated, "It is beneficial for us to have multiple ideas to consider."
Here are the ideas we need to consider:
What should we sustain for future generations? Is it the Permanent Fund or should we also include the non-sustainable petroleum wealth still in the ground? Should we account for the likelihood there will be more Alaskans in the future?
How conservative should we be in forecasting future petroleum revenues? If we are too conservative we unnecessarily put a burden of taxes and inadequate public services on the current generation. But if we forecast revenues that don't materialize, we overspend today and burden future generations. Forecasting the future return on our financial assets involves the same risk.
This is a critical time for Alaska as we transition to using the wealth we have accumulated over the last four decades. So getting it right will require a lot more hard work by all of us together.
Randall Hoffbeck is commissioner of Revenue for the state of Alaska, and Dr. Scott Goldsmith is professor emeritus in economics at the Institute of Social and Economic Research of the University of Alaska Anchorage.