It’s a good thing that the Haines Borough’s founding fathers were wise enough to tuck away a bit of gift money for an emergency. That’s how we got our $9 million borough permanent fund.
Whether we’re as wise managing the fund as they were in creating it can be debated.
Saving gift money for emergencies is an Old World idea and a good one. For generations, refugees and travelers sewed coins or other treasures into linings of heavy coats for safekeeping, a secret stash aside from one’s purse to be used only in dire emergencies, a form of insurance.
On my mother’s wedding day, an uncle gifted her a bit of insurance, a $20 gold coin minted in 1898. As the coin was worth much more than $20 and held sentimental value, mom tucked it away. Years later, I inherited it.
Today the coin is valued at about $1,700. I don’t intend to spend it. Gifted income shouldn’t be folded into regular spending, as there’s no replenishing it. I’m saving it, instead. I might need it someday.
The Haines Borough permanent fund came from the sale of lands the State of Alaska gave to the municipality, also gift money. Because the money represented the sale of land, a permanent asset, borough leaders agreed to tuck away land sales income in its own permanent investment account.
The fund’s earnings eventually grew enough that the borough could skim off a considerable amount of interest – today more than $300,000 annually – money that is folded into the budget annually and used to reduce property taxes.
But a founding idea of the fund was that its principal could be tapped, if needed, by a vote of the people. Money you have but can’t use, after all, is the same as no money at all.
During the oil-rich years since the fund was created, Haines rarely suffered a dire fiscal emergency. The borough suffered a shock in in 1986, when oil prices plunged and Alaska was thrown into a three-year recession, but Alaska and the borough were really only shifting from rich to middle-class.
(To stem the 1986 crisis, the school district eliminated its $70,000 salary for the Community Education job and laid off paid assistants at its two school libraries. For years after the school district maintained two, full-time librarians, each at certified teacher pay.)
The borough now faces a significant fiscal crisis. The state has reneged on a promise to help pay off our school reconstruction in 2007 – a $450,000 annual payment – among other obligations it has abandoned. More significantly, losses to business, including tourism, due to coronavirus will cause an estimated loss of up to half the town’s sales tax income, or $1.7 million.
Totaled, that’s more than a $2 million hole in a $13 million general fund budget.
The assembly – which has dug in its heels against raising property taxes and appears opposed to any draw on permanent fund principal – is looking at possibly closing the Sheldon Museum for a year, the swimming pool during summer months, and the public library for a month, among other cuts.
Those measures seem draconian for a one-time hit to the borough pocketbook, ones that will cost jobs and further disrupt families and our economy.
At the assembly’s budget discussion Tuesday, member Gabe Thomas said the pandemic wasn’t emergency enough to warrant tapping our permanent fund, citing a devastating earthquake as perhaps reaching that mark. In fact, tragedies like deadly earthquakes are routinely remedied by state and federal money released through disaster declarations and funding.
The coronavirus shutdown is the largest disruption of our nation’s personal and business fortunes in at least 50 years. It’s the world’s most widespread plague in more than 100 years. It’s difficult to imagine a more severe or unforeseeable hit to our town’s budget.
For these reasons, using a small amount of permanent fund capital to cover the actual amount of sales tax revenues lost to the pandemic is both reasonable and justified. It should be considered.