Being bold now will protect Alaska’s economic future

After weeks of sheltering in place, far too many Alaska families are wondering how they are going to pay their bills. Recent job losses are staggering and indicate just how desperate the situation is for thousands of our neighbors.

Alaskans and Alaska businesses need cash now to survive so recovery remains possible.

Here’s what we propose for a plan to get cash to Alaskans. Currently, federal stimulus payments are showing up in Alaskans’ bank accounts. That is a good start, but a one-time cash payment won’t be enough for many Alaskans enduring one of the worst economic downturns ever, especially at the beginning of what is going to be a very rough summer.

With the federal stimulus arriving now, the state should pay the 2020 Permanent Fund dividend early, around May 15, rather than in October. Then, the state should follow with three additional, smaller, COVID-19 emergency payments to Alaskans roughly around June 15, July 15 and Aug. 15.

Giving money directly to Alaska families through cash payments so they have the flexibility and autonomy to make their own financial decisions is the right idea. But we need the consistency of multiple monthly payments to achieve any kind of stability, both for families and for Alaska’s economy.

Using existing state cash flow and accounting principles, the state could effectively use money from one state fund and repay it from the funds designated by the Legislature for the dividend on July 1, when the new state fiscal year begins. However, if the Attorney General’s Office says this is not possible due to how the Legislature structured the budget bills, then we hope the Legislature will take the lead and change the appropriation to make the Permanent Fund dividend payable now. Regardless who does it, paying the dividend now injects up to $680 million into Alaska households and the Alaska economy. Waiting until October will be too little, too late for many Alaskans barely hanging on.

The three monthly emergency payments of a fixed amount can come from an appropriation the Alaska Legislature made in 2019 to the corpus of the Permanent Fund from the Earnings Reserve Account, assuming the money has not already been transferred back to the corpus. If that money is no longer available, the Legislature should write a check to Alaskans for these emergency payments from the Earnings Reserve Account to provide Alaskans the breathing room they need now.

Next, the state should establish a 100% loan guaranty program for small businesses. This way, local financial institutions can create bridge loans for businesses while the federal government loan programs get funded appropriately. In simpler terms, we must provide local banks and credit unions with access to cash to lend to local small businesses until the feds can ramp up. Many Alaskans work and earn a living at a small business, so protecting these businesses means protecting our workers as well.

Still, the state needs to go bigger and bolder to save Alaska jobs and businesses. We understand this can feel even more daunting with the recent movement on oil prices, but this further underscores why we must diversify our economy and support a range of Alaska businesses.

To do this, the state should provide between $500 million and $1 billion in new capital — as equity — beyond what the federal government is funding, to save jobs and Alaska businesses. The Alaska Permanent Fund or perhaps AIDEA — with more money from the Legislature — could quickly solicit expressions of interest from Alaska investment firms to manage the money. The investment firm uses the money as equity from a fund targeted at saving Alaska jobs and businesses, and requires a break-even or very low rate of return as its target — in other words, the state gets its money back over time.

The basic concept is that the investment firm manages the state’s money with the mission of saving jobs and savable businesses. With the state’s money, the investment fund looks for a good management team, a good business model, and cash-poor balance sheets.

This type of investment fund, for the social good, is used by other sovereign wealth funds around the world. Rather than targeting a higher rate of return for all of its investments, sovereign wealth funds often set aside a small portion of their investment portfolio targeted at investments providing a low rate of return combined with achieving a specific benefit for a wider group of people. In this case, saving as many Alaska jobs and businesses as possible, while kickstarting the most diversified economy our state has ever seen. Investments can be made in companies of all sizes, provided the funds’ goals are achieved.

This week, the administration announced initial measures in a phased approach to begin re-engaging Alaska’s workforce. While going “back to work” is an option for some, a huge swath of Alaskans are now unemployed and many Alaska businesses are struggling. The impacts of this economic shutdown could very well be the most severe economic crisis our nation has ever encountered. It requires us to think differently and to quickly adapt for the sake of our families, jobs and Alaska’s future. Instead of relying on a one-time payment included in the federal relief package, we need a consistent, ongoing infusion of financial support.

Our leaders must get substantially more cash to Alaskans and Alaska businesses, and in a predictable, stabilizing way that sets our state up for long-term recovery.

Alaskans are doing everything they can to survive and climb out of the hole we’re in, but they need help now. We urge all state and local leaders to act quickly and boldly to lay a stable foundation for economic recovery.

Mark Begich is a former U.S. senator and also served as mayor of Anchorage. Sean Parnell served as governor of Alaska from 2009-2014. Both now work in the private sector.

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