In a Web Note published by the University of Alaska Anchorage Institute of Social and Economic Research, economist Scott Goldsmith calculates that State government can draw $5 billion per year from petroleum wealth while preserving that wealth in perpetuity for future Alaskans. Any state spending above the $5 billion annual draw would need to be funded by non-petroleum taxes and other revenues.
Goldsmith's calculations assume that our current petroleum wealth includes the $45 billion currently in the Alaska Permanent Fund, Constitutional Budget Reserve and other accounts - plus $81 billion of oil and gas revenues still in the ground. He also assumes that Alaska's population will grow at 1% annually, and that we can invest our petroleum wealth at a 5% return, net of inflation.
Goldsmith suggests Alaskans adopt a target of "equal and sustainable wealth for all generations of Alaskans" with a $5 billion annual benchmark - if we draw and spend more than the $5 billion, future generations will enjoy less per-capita petroleum wealth than we do today. If we draw less, future earnings will be higher and future generations will be better off than us.
Because more than half of the wealth in this calculation is based on oil still in the ground, the benchmark could be higher or lower depending on how much is ultimately produced, the price of oil, and the state's fiscal terms.
Read the full 18-page Web Note here.
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