Ed Rasmuson

GUEST COMMENTARY: Speak up in support of the University of Alaska

It is time to speak up to support the University of Alaska. By 2025, 65 percent of the jobs in Alaska will require some form of postsecondary education. The last time this was measured, just 37 percent of Alaskans held a degree and only 50 percent had some form of higher education. Alaska is facing large workforce gaps today and these will only grow if we can’t educate and train our own residents to compete in an economy that increasingly demands, and rewards, higher education. The university has historically been a major economic driver and a primary source for developing Alaska’s workforce. So when UA President Jim Johnsen asked us to co-chair the Alaska Public Higher Education Roundtable, we quickly agreed. We know that the university solves real world problems, produces an informed citizenry, and helps propel Alaska forward. We want our young people to study, work and stay in Alaska. A strong state university helps ensure that happens, and positions our people to build innovative new enterprises that will serve our state well into the future. Maintaining our global leadership in Arctic research also is essential. The university is the number one Arctic research institution in the world, but it needs our support to remain competitive. There is a direct correlation between educational attainment and income. Education builds a stronger, more diversified economy and healthier, more engaged citizens who give back to the communities in which they live and work. That’s great for families, businesses, and our state. However, our university faces a series of challenges: Alaska’s low high school graduation and college going rates, the university’s land grant deficit (only Delaware received less than we did), recent state budget cuts, and a rapidly changing economy, which will demand a more highly educated workforce. The University of Alaska is facing these issues head on, but it is being hit by year-over-year budget reductions. Over the last three years the university’s budget has been cut by $52 million dollars. As a result, there are 927 fewer people working at UA today than in 2015, 50 academic programs have been suspended or discontinued, fewer classes are offered, less research is being done, and fewer Alaskans are being educated. Through our engagement with the university, we know that it is proactively pursuing several worthwhile strategies to diversify and increase its revenues, reduce its costs, and gradually moderate its reliance on state funding. These include: • Increasing enrollment through aggressive recruitment and online programs • Building stronger partnerships with Alaska’s school districts • Growing research capacity and investments • Eliminating unnecessary redundant programs and services • Cutting administrative overhead • Increasing public/private partnerships • Increasing philanthropic support • Addressing its land grant deficit • Looking out 10 years to make sure Alaska’s long term education needs are met However, the university still relies on the state for an important part of its funding. The legislature should give the university ample time and the funding needed to continue the progress it is making to pursue these worthwhile strategies. The Alaska Public Higher Education Roundtable agrees that it takes a great university to build a great state. The University of Alaska changes lives and creates economic opportunity at a time when our state desperately needs it. Let’s show our support. ^ Aaron Schutt and Ed Rasmuson are the co-chairs of the Alaska Public Higher Education Roundtable.

Open letter to Legislature: 2017 is last chance for hard choices

Dear Alaska Legislators, We know each of you wants to do what is best for our state's long-term future. We all want jobs for Alaskans, a healthy economy, a stable state fiscal structure that helps attracts private investment to Alaska, and quality education and public services to serve the needs of our residents. We are encouraged when we hear legislators talk about Alaska's long-term economic health. But we are discouraged that we are running out of time to accomplish the one goal that must underpin all the others — a stable fiscal structure for our state treasury. We write you today to once again offer our encouragement, with an emphasis on the urgency of the situation as you prepare for the 2017 legislative session. We are sharing this with the public because Alaskans need to understand this is a critical time for our state. We've grown wealthy from oil development, and we all hope for decades more of oil and gas production in Alaska. But the time has come for a diversified revenue stream into the state treasury, and Alaskans must support their legislators in making the hard decisions ahead. The facts are clear: • The fiscal 2017 state unrestricted general fund budget is about $4.36 billion. • Even with higher oil prices of recent weeks, it looks like the FY17 draw on savings to cover the budget will total close to $2.92 billion. • With that math, the state expects to start the fiscal year 2018 on July 1, 2017, with perhaps $3.7 billion remaining in the Constitutional Budget Reserve. • Prudent fiscal and cash management requires we keep at least $2 billion in the budget reserve, which means Alaska must make changes to its fiscal structure during the 2017 legislative session. • If the budget reserve disappears as an option for covering the state's needs, the Permanent Fund earnings reserve becomes the only alternative. As of Nov. 30, 2016, at approximately $8.8 billion in realized gains, that reserve account looks healthy but is always susceptible to investment volatility, and any unplanned withdrawals could jeopardize the Permanent Fund dividend. It appears to many Alaskans that nibbling at the edges of the problem in the 2017 legislative session and drawing $2 billion to $3 billion from the budget reserve for one more year would bring the state perilously close to writing unplanned checks out of the Permanent Fund. It's time for a managed answer, not a default answer, and we urge you to take action and assure you we will support you in that effort. The options for a long-term fiscal plan are the same ones Alaska has been looking in the past several years. We see four major pieces to any solution: • An orderly, responsible, managed use of Permanent Fund earnings, including a change in how the dividends are calculated. We cannot spend the same dollar twice, which means a dollar that goes to schools, roads, troopers, the courts and other public services cannot also go to dividends. Legislators are fully aware that choices must be made. If, for example, the Legislature adopted a percent-of-market-value approach to limiting the annual withdrawal from the Permanent Fund, and if that were set at 4.5 percent of the fund's average market value looking back five years, the maximum draw for fiscal 2018 would be about $2.43 billion. And if, for example, you wanted to maintain a $1,000-per-person dividend from that total, that would leave about $1.73 billion for public services. • An orderly, responsible, managed examination of state spending and potential for further budget reductions in the range of $250 million to $500 million implemented over two to three years to lessen harm to the economy and allow the public, municipalities and businesses time to prepare for reduced services. • A responsible broad-based tax, such as a modest personal income tax on Alaska's higher income earners and/or a sales tax that would accomplish several goals: 1) Give all Alaskans a personal stake in how state money is spent; 2) Collect income from nonresidents who come to Alaska to work, and go home to spend their money; and 3) Help diversify state revenues from our total dependence on natural resource prices and investment earnings. • Excise and industry-specific taxes of perhaps $100 million a year on motor fuels, alcohol, tobacco, fisheries and mining. Here is the math for the current set of options: $4.36 billion fiscal 2018 state unrestricted general fund budget using fiscal 2017 as the base. • $1.59 billion in general fund revenues (assuming today's improved oil prices remain) • $250 million to $500 million in additional budget cuts, including re-examining oil and gas tax credit policy • $1.73 billion in Permanent Fund earnings, after paying a $1,000 dividend • $500 million in new revenues (income and/or sales tax, higher excise taxes and industry taxes, including expansion of the corporate income tax to cover LLCs and S Corps.) That still leaves a $40 million to $290 million shortfall, which we could work to close over the next few years. By taking action on the major pieces above, we gain some time. Meanwhile, we should not forget that the state needs to deal with the hundreds of millions of dollars we owe to companies for unpaid oil and gas tax credits. We need to resolve that debt if we're to truly solve our fiscal problems. And we need to remember that, because it will take time to implement any new taxes and to collect on other changes in Alaska's tax structure, we should expect a larger drawdown on our budget reserves in fiscal 2018 as the changes take effect. The budget reserve, however, can only afford a limited future drawdown, so we need to make the big decisions in 2017 that will extend the life of the reserve to give us the time to put our state on a path to fiscal stability. There isn't enough time for new oil or triple-digit prices to save us. That's wishful thinking, and we need responsible decisions based on today's reality. We support you in the challenges ahead, and urge you to make those decisions in 2017. Anything else puts the future of our state at risk. Ed Rasmuson is a retired banker. Bill Corbus is a former commissioner of the Alaska Department of Revenue. Jeff Cook is an energy consultant. Gail Schubert is CEO of Bering Straits Native Corp. Mike Navarre is mayor of the Kenai Peninsula Borough.
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