The Path to a Fiscal Solution: Use Earnings from All Our Assets

Abstract

Thanks to a combination of good decisions and a little luck, today Governor Hammond’s vision has become a reality. More than $60 billion in financial accounts now generates more income for the state government than petroleum production. Yet we continue to rely mostly on current petroleum revenues to pay for public services—and as oil production declines, “sliding down the falling Prudhoe Bay revenue curve” is proving to be a formula for fiscal and economic disaster. In fiscal year 2016, General Fund revenues are expected to be only about $2.2 billion. That will leave an apparent “deficit” of about $3.3 billion, based on spending of $5.5 billion. But the state doesn’t have to face such a huge shortfall. There is a straightforward solution that Jay Hammond foresaw: using both current revenues and earnings from the state’s portfolio of assets (financial accounts and future petroleum revenues) to pay for public services.