A leading state economist says Alaska is saving too little of its oil wealth for future generations.

The good news is that Alaska is rich enough -- in oil wealth savings and in petroleum reserves -- that it can afford to spend $5 billion of its oil wealth every year, even after the oil fields die away, said Anchorage economist Scott Goldsmith.

The bad news: The state is likely to spend more than $5.5 billion in petroleum dollars in the coming budget year, he wrote in a report published by the University of Alaska Anchorage's Institute for Social and Economic Research on Tuesday.

Think of it like saving for retirement. You need to save enough money to ensure you don't go broke in your 70s and 80s.

"We have to be careful that we don't spend so much (money) today that we don't have anything when Prudhoe Bay runs out," he said.

Production from Alaska's aging oil fields has dropped to a third of its 1988 peak and will continue to fall, even with new oil discoveries, according to his report.

So far, Goldsmith said, Alaska has saved up an adequate amount for the future but that's only because it's been lucky with recent high oil prices and because much more oil has been produced than expected when Prudhoe, the nation's largest oil field, began operating.

"Our tax base isn't sustainable so we shouldn't treat it like it is," Goldsmith said.

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