In reading a New York Times guest editorial earlier this week by Gar Alperovitz and Thomas Hanna, one could make a case that for the sake of our public institutions, K-12 schools, and higher education, both Governor Doug Ducey and State Treasurer Jeff DeWit are correct. Our State Land Trust should be protected to serve future generations, but also the State Land Department can and should be a much bigger player in funding our public education system, both K-12 schools and higher education.
The Times opinion piece points out that conservative states like Alaska, Texas and Wyoming have all kept their state taxes low, including no state income tax, through the successful public ownership and management of capital assets.
The Alaska Permanent Fund, established in 1976, collects and invests proceeds from the extraction of oil and minerals in the state. The Alaska Permanent Fund is worth more than $54 billion dollars today and sends an annual dividend check to every Alaskan resident.
The Texas Permanent School Fund, established nearly 150 years ago, took control of roughly half of all the land and associated mineral rights still in the public domain.Â In 1953, the fund took control of submerged coastal lands relinquished by the federal government. In 2014 alone, state schools received $838.7 million directly from the Texas Permanent School Fund.Â According to Alperovitz and Hanna, “The $17.5 billion Permanent University Fund, a separate fund from the TPSF, owns more than two million acres of land and contributes money to help underwrite the state’s public university system.”
The Permanent Wyoming Mineral Trust Fund, valued at more than $7 billion accumulated from mineral extraction, was a huge factor in the state eliminating its income tax.
Arizona has already proven that public ownership of capital assets, such as electrical distribution and generation, can greatly benefit the citizens of our state.Â In Arizona, more than 40% of our annual electricity is generated by publicly owned and operated electrical entities. We enjoy some of the lowest rates in the West and our publicly owned utilities provide reliable and affordable power throughout the state.
Nationally, there are over 2,000 publicly owned electric utilities which supply more than 25 percent of the country’s electricity. In Nebraska, a very conservative state, every single resident receives their electricity from publicly owned utilities. Yes, that’s the same Nebraska that Warren Buffett comes from!
While other states may have resources such as oil, in Arizona, one of our greatest natural resources is land.Â Countless entrepreneurs and successful businessmen and women in our state have made their fortune through the entitlement and development of land. Today, Arizona’s Permanent State Land Trust Fund has over 9 million acres of undeveloped land and over $5 billion dollars in cash. Under the existing Arizona Constitutional provision passed by the voters in 2012, the various beneficiaries receive 2.5% of the average market values of the funds over the previous five years and will receive that amount until 2021. Governor Ducey has proposed increasing that amount over the next ten years for K-12 schools.
On the other hand, Treasurer DeWit has warned that the proposal may diminish future returns by dipping into principal balance. DeWit instead suggests that the state sell more land to increase the long term value of the trust.
The truth is “ both elected officials are right. We need to increase the return from the fund to pay for our current education now, and like other states, we need to modernize the State Land Department so it can actively pursue efforts to increase the long-term value of the trust. It won’t be easy, but with leaders like Governor Ducey and Treasurer DeWit, Arizona can succeed.
At HighGround, we have been looking at this type of proposal for years on behalf of our clients and because we believe it is the right thing to do to secure the future of our state. We strongly believe a successful reform proposal can be put before the Arizona voters in the fall of 2016 that accomplishes the following five goals:
- Provide increased education funding upon passage of a referral to both the K-12 Education and University system as well as settle the on-going education lawsuits.
- Grow the Endowment Funds by creating an entrepreneurial State Land Department in which beneficiaries of the Trust will participate in the increase in equity of lands sold to developers for true value when the lands are entitled through approvals by the local planning and zoning authorities.
- Fund the State Land Department to augment the existing support the Department receives from the General Fund.
- Authorize the State Land Department to conduct planning of state parcels to prepare them for sale and entitlement.
- Coordinate with Arizona’s Congressional Delegation to ensure Congressional action to conform the Federal Enabling Act after passage of an Arizona Constitutional Amendment in November 2016.
Theodore Roosevelt once said, “Nothing in the world is worth having or worth doing unless it means effort, pain, difficulty.â€
Let’s start the discussion and get a proposal in front of voters that increases funding to public and higher education, doesn’t raise taxes, and grows our Permanent State Land Trust Fund for generations to come.
Alaska, Texas and Wyoming have done it. Arizona has done it for public power which keeps our utility bills lower. Now, we need to do it for education.
The future of our state’s prosperity depends upon it. Let’s get busy!