It’s an article of faith among many politicians that the Permanent Fund Dividend (PFD), needs to be reduced to fix Alaska’s fiscal problem. This assumption is widespread but is it valid?
Alaska has a fiscal problem, to be sure. Recent downgrades of Alaska’s credit rating confirm our problem.
Basically, Alaska has a structural budget imbalance. But this imbalance is not simply an issue of too little revenue or too much spending, as is often claimed.
The enormous delta between our state’s spending and revenue has long been a problem. Instead of bringing our state’s spending in harmony with revenue, Alaska’s politicians have been content to spend down savings to maintain unsustainable budgets.
The bigger problem in Alaska is a profound lack of political leadership. Having dithered for years and squandered savings to fund unsustainable budgets, Alaska’s politicians are now raiding your PFD.
Curiously, many average Alaskans are seemingly complacent about having their PFD reduced. I wonder why?
Alaskans amended our constitution in 1976 to establish the Permanent Fund to save a portion of the non-renewable oil wealth for the future. To protect the Permanent Fund, Jay Hammond and other thoughtful leaders established the PFD.
Hammond knew the PFD would provide every Alaskan with a small measure of our saved oil wealth and help prevent politicians from looting the Permanent Fund. In practice, the PFD has helped every Alaskan equally and diversified our economy.
The attempt by politicians to grab a hunk of your PFD is more a matter of expediency than necessity. Using your PFD to balance the budget should be the last step in devising a sound fiscal plan, not the first step.
Alaska’s current fiscal situation is largely a self-induced political problem. This subcontinent we call home has sufficient resources to deal with our finances before tapping your PFD. Additional targeted cuts to the budget and obvious fair revenue increases are available to achieve a balanced and sustainable budget without slashing every Alaskan’s PFD.
Squabbles about taxes, cuts and credits have produced political gridlock. As a result, the politicians have resorted to using your PFD as a convenient way to pass a budget. Why Alaskans put up with this reduction of their PFD is puzzling.
Existing law allows every eligible Alaskan to receive a PFD based on the five-year average of income generated by the Permanent Fund. Current law requires the Permanent Fund Corporation to place funds generated by the Permanent Fund into the Earnings Reserve Account for disbursement.
Funds for the PFD are never placed in the General Fund according to existing law. The legislature is not required to pass an additional appropriation for the PFD; no action is necessary by the legislature or the Governor to make the full PFD payment to every Alaska.
So why is your PFD getting chopped?
The reason you are getting a reduced PFD is because the Alaska Legislature and the Permanent Fund Corporation failed to follow the existing PFD distribution law.
The extraordinary events where the current Governor “vetoed” the PFD distribution law and at the same time reduced each Alaskan’s PFD were possible because the legislature included an unnecessary appropriation related to the transfer of PFD funds in the annual operating budget bill last year.
The peculiar way the PFD was reduced led to a lawsuit that is rumbling along and now in the Alaska Supreme Court.
At the core of the PFD dispute is the existing law requiring payment of an equal dividend to every eligible Alaskan. Nothing more and nothing less. No other enactment of law or appropriation is necessary.
The current law should be followed. Every Alaskan should receive a full PFD unless the law is changed. If we need to change the existing PFD distribution formula based on a genuine crisis or natural disaster, then the law should be altered openly, not via some arcane budget bill maneuvering.
The PFD is your share of the public oil wealth. Instead of providing every Alaskan with a proper share of the interest generated from our collective oil wealth savings, the politicians are shorting your dividend.
Next up may well be a raid on the Permanent Fund itself.
• Joseph W. Geldhof is an attorney and resident of Juneau.
