“Defunding power cost equalization would gut a lifeline for rural Alaska” was published by ADN on Nov. 10. Meera Kohler expertly laid out the history and purpose of the Power Cost Equalization Program. The op-ed piece was beautifully written and very persuasive. But it missed the point of advocates to end the unconstitutional appropriations of dedicated funds.
No one is attempting to stop the appropriation of funds for Power Cost Equalization. Those of us advocating consolidation of agency funds to the Constitutional Budget Reserve want to solve the current fiscal crisis by using unspent, appropriated funds that are currently restricted by the Legislature. These appropriations exceed the needs of their programs and earn huge profits for their agencies.
The Power Cost Equalization Fund was established by the Legislature in 1981 as a fund of the Alaska Power Authority. The AEA audited financial statement lists the balance of the fund, $1.06 billion, as restricted. But Article 9 of our Alaska Constitution bans restricted or dedicated funds. No appropriation except those specifically authorized by an Amendment to the Alaska Constitution, federal appropriations or funds existing prior to statehood are allowed by the Alaska Constitution. No other appropriations can be restricted to a special interest. Dedicated funds are illegal.
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Power Cost Equalization has not been approved by the people at a statewide vote as an Amendment to the Constitution, is not a federal appropriation nor did it exist prior to statehood. Last year, PCE earned $74 million dollars. And it paid recipients throughout Alaska $30 million. And made a profit of $44 million to grow more agency.
I have no objection to the appropriation and payment of funds to help equalize costs of power in villages throughout Alaska. During the Palin Administration, my Fairbanks friend and I convinced the governor to add $1,000 to each Alaska PFD for power cost equalization. The equitable argument of urban areas having access to cheap hydro power through construction of dams throughout Southcentral and Southeast is persuasive. But should a needed appropriation of $30 million for a worthy purpose like PCE hold hostage over $1 billion dollars owned by all Alaskans? I think not.
We cannot set aside all Alaskan’s money for one region’s benefit.
That billion dollars and other excess capital should be transferred to the Constitutional Budget Reserve as required by the Constitution and the statute which created the CBR. All dedicated funds not in compliance should be liquidated and saved to the Constitutional Budget Reserve. The CBR requires a 75% vote of each house to use, so the money can be protected from wild spenders. With those funds, the budget deficit disappears. And the regional internecine wars in the Legislature can end.
We can bridge the fiscal gap by using the available assets of the State and push for new production in the oil, gas, mining and investment sectors. The crude producers, old and new, have identified over 1 million barrels per day of new production which can add to the production of existing legacy fields. The producers and the State must realign their interests and advocacy for new production for the health of the state. With nearly 60% of Alaskan voters defeating the tax increase in Prop 1, the decks are clear to resume the Renaissance of the North Slope. Let us accelerate our production.
My mother taught me that if I got in trouble, I had to work my out of it. “Produce your solution, Son.” Good advice. My family has been here since 1898. We’ve all worked through worse crises than we now face. We can rebuild our economy and protect our family’s health.
We just need to use our assets wisely, not squirrel away money we need today as illegal dedicated funds.
Power Cost Equalization is an honest and honorable goal. We can support annual appropriations for the costs of the program. We, however, cannot set aside all Alaskan’s money for one region’s benefit.
Advocacy for preserving PCE is now an organizing call for the next Legislature. It should not be. Republicans and Democrats and Independents, conservatives and liberals understand that the crushing cost of energy must and should be addressed annually. Different approaches are all open to discussion. Some believe that new roads or expansion of major projects can solve the regional high cost through industry. Some believe that subsidizing power cost is currently insufficient. These matters can be reconciled with good will in an open discussion of the state’s priorities. But first, we must follow the Constitution and not restrict appropriated money for special needs.
Alaskans can pull back from the brink of fiscal instability. We just need to use our assets wisely, not squirrel away money we need today as illegal dedicated funds.
Jim Crawford is a third-generation Alaskan entrepreneur who resides in Anchorage with his bride of 37 years, Terri. The Alaska Institute for Growth is a local think tank which studies and reports on and may sponsor projects of sustained economic growth for the Alaskan economy. Crawford known as the Permanent Fund Defender was a member of the Investment Advisory Committee, appointed by Governor Jay Hammond to plan and execute the Alaska Permanent Fund Corporation.
The views expressed here do not necessarily reflect those of the Alaska Watchman.
3 Comments
Jim, well done article.
You lay out great reasons for the Billion to go to the CBR. My concern is , here we go again needing Dem votes to use the CBR.
Sadly, even if Lance Pruitt wins, we only have a 2 vote majority.
What needs to be done is a reduced budget that has no need of the CBR, give them time to rebuild the CBR for a truly rainy day.
Really interesting and enlightening. Thank you! Definitely part of the solution. I was completely unaware of these appropriations and now want to investigate and learn more!
Also, I would say also cut the state DOT Matsu valley road service budget by 50%. If they get back to simply plowing roads as needed, dropping some traction material only where needed, instead of constant sanding and resending of already heavily sanded, filthy muddy roads, a bit of money could be saved there as well. There is defiantly room for belt tightening in more than a few departments.
Jim , Consider this also!
Thank you for your willingness to help with this plan that brings Alaska’s future back into perspective!
I believe we should:
1) Audit all departments from top to bottom; all programs funded by all sources of revenue. Thoroughly review operational spending in each department to streamline & consolidate duplicate program implantation(s) for waste, possible fraud & abuse in all aspects of expenditures. Essentially construct a new budget from zero base budgeting with all of the above in mind. This has the potential of cutting an additional $500 Million
2) Cut the most costly direct services but preserve the basic infrastructures in place that would generate a positive revenue! The first that comes to mind is the Alaska Marine Highway System. Sell the ships to any corporation that can continue service to southeast communities & beyond (preferably an Alaskan one like a Native corporation. Lease, like the Airports, to that company our dockside services at a profit to Alaskans. This should generate $500 to $750 million in revenue to the state & eliminate an employment requirement & future retirement mandate!
3) Offer/sell to Alaskans a”land voucher” in exchange for the annual PFD for a period of up to ten years [ targeted towards Alaska’s youth ] and all others in an effort to keep the money in the Earnings Reserve for future investment for future Alaskan PFD’s. This land disposal starts with this program & further allows for 500,000 acres total; purposefully dedicating 200,000 acres for Alaskans only! The balance to any willing new resident as was intended under the statehood act. The minimum value to Alaskans at $2,500.00 an acre & all others at $3,500.00 an acre .
This effort is to create opportunity & new wealth / investment in our state. All lands will then change it’s liability from the state to private citizens as is the culture & promise afforded to the American way of life! This program adds the transfer of wealth to Alaskan(s) / Other American(s) & provides a larger tax base to local governments for local services! A total win, win. This should generate approximately $1.5 to $1.7 Billion to the states revenues & several million dollars to local services thru property taxes.
4) Cut the University funding to a token $50 million encouraging that they, thru their land grant(s), develop those lands to be self sustainable & do as what was the intent of the grant(s)! This will generate education in resource development training & future jobs to Alaskans benefiting all in private & state resources development & revenue creation. This will save $300 million a year!.
5) Lastly, create additional revenue from sale of resources like (the infested & potential fire risk) timber with the greater in mind development of those lands for agricultural crops to establish food security that is currently dependent on out-of-state sources. This has a savings & benefit to the health & safety to Alaskans and their jobs! Saving $50 million or more a year in expenses of fighting fires protecting state & properties. The warming climate & prevalent condition experienced in Alaska has to be addressed!
All total conservatively, we could realize savings & initial sells of 2.9 billion not to even guess the investment from leaving money in the Earnings Reserve & private investment with new wealth creation!
This Plan holds no copyright, although leaves a lot out of other great Alaskan ideas, I challenge all of us in the Great State to have an IDEA.! More then ever with the Covid-19 shutdown,we cannot linger in the furtherance of the do-nothing approach!
This 5 point, Alaskans Love Of Home Approach (ALOHA) Plan comes from a simple man with 5 generations in Alaska & 55 years of experience loving & living in this Great State, that deserves attention by & for all Alaskans.
Liberty Ed Martin Jr.
Best of luck Alaska!