Today I presented Senate Bill (SB) 178 to the Senate State Affairs Committee. I introduced this legislation as a Senate Finance Committee bill so the Legislature can have a serious discussion about how we manage the state’s savings accounts.
High oil prices have provided the state a healthy budget surplus which is currently in excess of $15 billion (in addition to the $39 billion in the Permanent Fund account). This is a result of the Legislature’s prudent financial management of state finances. But looking toward the future, it’s important to ensure Alaska’s finances continue to stay strong by creating a fiscal framework that will protect our substantial savings from irresponsible spending.
SB 178 would do just that by creating the Alaska Operating Endowment Fund as a depository for the state’s savings in order to generate revenue for the benefit of future generations of Alaskans. Once the Fund has been capitalized with the $15 billion from the state’s savings accounts, the Department of Revenue will manage and invest the fund in the same manner as the Alaska Permanent Fund Corporation. At the end of each fiscal year, the Department of Revenue will determine the average market value of the fund for the preceding three fiscal years. Once that amount is determined, an amount not to exceed four and one half percent may be available for General Fund appropriations by the Legislature. This will provide a steady stream of funding for the state far into the future that is not subject to the volatility of oil prices. It will also protect the state from overspending in years of surplus revenue and provide a cushion for years when the state is facing deficits.
To read the bill and review supporting documents go here.