A new analysis by Scott Goldsmith, professor of economics at the Institute of Social and Economic Research (ISER) at the University of Alaska Anchorage, examines the issue of preserving petroleum wealth for future generations of Alaskans.
Almost all of Alaska’s state revenues come from oil, and since production is declining, it is important that some is set aside for future needs. But how much of current petroleum revenues can Alaska afford to set aside, while also ensuring there is enough to meet present spending needs? Goldsmith offers an answer based on the current value of our financial assets and future projected petroleum revenues, using the most recent Alaska Department of Revenue forecast.
His study finds that Alaska could spend as much as $5 billion annually from petroleum wealth and still conserve the value of that wealth for future generations. Currently the state is spending more than $5 billion per year, and is therefore gradually eroding the value of our petroleum wealth and passing a fiscal burden on to future generations. Goldsmith advises that state spending above $5 billion should be paid for with non-petroleum taxes and other revenues. Goldsmith writes “In that way each generation would share equally in the benefits of our wealth and share equitability the responsibility of paying for the public services it enjoys.”
To read the full report, click here.
This report is part of ISER’s Investing for Alaska’s Future research initiative, funded by a grant from Northrim Bank.
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