In 1964, Alaska was struck by a 9.2-magnitude earthquake that lasted 5 ½ minutes. More than 130 people were killed. The massive quake triggered tsunamis in coastal communities, including my hometown of Valdez. More than 30 of my friends and neighbors were killed that Good Friday afternoon. I was 12 and I remember everything as though it happened yesterday. Today, Alaska has been struck by an earthquake of a different kind. While most Americans are celebrating bargains at the fuel pump, low oil prices mean hard times in Alaska. In the past two years, Alaska’s oil revenue – our state’s lifeblood – has plummeted by 88 percent.
Alaska is now facing a $3.8 billion deficit this year – in part because of low oil prices but also restrictions that have been placed on the state. When Alaska became a state in 1959, we were granted 3 million acres of federal land. Along with this land from the federal government came a prohibition from selling the oil or gas in the ground. We were limited to living off the royalty associated with the extraction of those resources, which is 12.5 percent. When the Arctic National Wildlife Refuge (ANWR) was established, Congress specifically designated an area of the coastal plain—the 1002 area—for oil exploration. It holds up to 16 billion barrels of oil, is located just miles from our existing pipeline and the portion we need access to makes up just 4 percent of ANWR. But Alaska is restricted from exploring for oil there.
The good news is we have options. And we have a plan. When oil started flowing through the trans-Alaska pipeline, my predecessors recognized that oil wouldn’t sustain us forever. They created the Alaska Permanent Fund as a means to turn a temporary oil boon into a permanent income generator. The fund was established in 1976 and designed to be an investment where at least 25 percent of oil money is dedicated for future generations. The fund is invested, and the earnings are then distributed to qualified residents as dividends. We’ve now reached a crossover point where our savings earn more income than our oil.
I’ve proposed a plan to put Alaska on a sustainable path through further spending cuts, modest tax increases, and use of a fixed portion of our permanent fund earnings to support public services — like educating our children, plowing our roads and safeguarding our communities. This plan will get us off the boom-and-bust cycle that tends to plague oil-dependent economies. It puts government on an allowance. It enables us to continue to grow our savings. It allows us to pay for essential services like education and public safety, and to invest in our economy. None of the pieces of my proposal are politically popular. That’s OK. As I told my fellow Alaskans in my recent State of the State speech, I did not run for governor to keep the job, I ran for governor to do the job. As governor, I will always put Alaskans’ interests above my own.
I’ve also told Alaskans my plan is written in pencil, not pen. It is currently before the state legislature. I am optimistic that legislators will gavel out of this legislative session in April with a plan that puts Alaska on a sustainable path forward. The only truly unacceptable course is to do nothing. Commentary by Alaska Governor Bill Walker. Follow him on Twitter@AkGovBillWalker. For the latest commentary on markets in the U.S. and around the world, follow @CNBCopinion on Twitter.