Borough Mayor Ward vetoes gimmick-ridden fund that would do little for education

Borough Mayor Bryce Ward has correctly sized up the so-called “education investment reserve” as a tax increase that will do little for education in Fairbanks.

Ward vetoed the ordinance, the only sensible thing to do. Here is his veto message.

“The creation of the reserve will increase taxes and will not increase education funding—it will most likely decrease education funding over the short term,” Ward wrote Tuesday.

The right-wing majority on the assembly approved the ordinance 5-4 just before the election. It was a piece of campaign fluff that sponsor Aaron Lojewski promoted as a visionary approach to education funding, claiming it would work something like the Alaska Permanent Fund in the decades to come.

Stripped of political hokum, Lojewski’s plan was no more than a call to raise taxes by diverting interest income and proceeds from land sales into a slush fund. He said the slush fund in future decades would grow to tens of millions, enough to produce annual earnings to help support education. Ideally, the deposits of the giant slush fund would never be spent, treated as principal, similar to the Permanent Fund. Legally, there is no way to prohibit the slush fund from being spent on any government function.

The assembly cannot dictate to future elected officials how money is saved or spent.

This proposal is pure fantasy, dressed up to appear substantial by mentioning the Alaska Permanent Fund in the same sentence.

As I wrote here Oct. 1, “There is no investment plan, no risk analysis, just a feel-good claim of easy money that no one will miss. We are told by Lojewski, Jimi Cash, Tammie Wilson and the rest that the slush fund will be allowed to grow for decades to come and no one spend it or complain about an untapped slush fund.”

There is no chance that the borough would be allowed by voters to stash away tens of millions in cash, just so that in theory, future assembly members and mayors will be able to withdraw millions each year to help support education.

“By hoarding large amounts of cash, the borough runs the risk of losing public trust,” is how the diplomatic mayor put it.

Lojewski said the fund would be large enough to produce steady income in 15 or 20 years, rising perhaps to $25 million over that period. But diverting $25 million into savings would lead residents to say they are being over-taxed by $25 million.

The fallacy of the ordinance is that it “does not actually increase education funding—it increases taxes for no benefit other than to squirrel away money into an investment fund that is speculative and far less secure than tax revenue,” Ward wrote.

Lojewski clearly wanted to use this as a campaign item to his advantage in the mayor’s race. He is running against John Coghill, Grier Hopkins and Savannah Fletcher. I have no doubt it will be a campaign issue, though not in the way he intended, as the flaws in this vetoed ordinance are obvious.

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