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5.6 Some Bogus Solutions

Can We Find $1 Billion A Year Like This?

Keep cutting the General Fund. You can't get $1 billion by targeting $100,000 of fat here or $1 million of waste there. You have to eliminate state money for everything from Pioneers' Homes to the ferry system—and then cut basic services (like educating children or managing fish and game) by 25 percent.

Look outside the General Fund. Aside from Permanent Fund dividends and inflation-proofing for the Permanent Fund, state spending from other funds is largely federal transfers for specific programs, bond proceeds for construction projects, and fees users pay for airports, the university, and other services.

Expect higher oil prices. Oil prices would have to hit $35 a barrel and keep rising to increase annual revenues by $1 billion. They haven't been that high since the early 1980s.

Raise oil taxes. Oil taxes would have to triple to add $1 billion to oil revenues. This sounds like a gamble at a time when the industry is turning to less profitable marginal fields.

Earn more on the Permanent Fund. Generating $1 billion more annually would require a sustained 10 percent return, after inflation—double that of most large endowment funds.

Wait for a natural gas pipeline. Revenues from a gas pipeline could range from $300 million to $1 billion annually, but construction is years away under the best of circumstances. We need five times that to reach $1 billion.

Promote economic development. Mining activity would need to grow 200 times larger to generate $1 billion in revenues.

Buy or sell state assets. No analysis has yet demonstrated that selling state assets or buying part of a pipeline could generate the level of returns we get from oil.

Tax the outsiders. A personal income tax or a seasonal sales tax on nonresidents could raise about $50 million annually. To get to $1 billion, we'd need 20 times more.

Have a bake sale. This assumes every man, woman, and child in Alaska would spend $1,500—every year—on things like a state lottery or legalized gambling.

Fiscal Policy Papers