This year the governor and some legislators are seeking to use Permanent Fund earnings — for the first time in history — to fund government. Before embarking down that path, Alaskans deserve to have their Permanent Fund Dividends protected, and the only way to do that now is to enshrine the PFD in the constitution.
Alaska is no doubt confronting a fiscal crisis of alarming proportions. But since the voters created the Permanent Fund in 1976, state government has received 100 percent of all oil and gas production taxes, 100 percent of corporate and state property taxes, and 75 percent of oil and gas royalties. The amount preserved for people — via the Permanent Fund — has generally been 25 percent of Alaska’s 12.5 percent royalty share, or about 3.125 percent of the value of our oil. And now some are seeking to permanently slash future dividends because they feel government hasn’t gotten enough.
This is not really a new phenomenon. All politicians say they support the PFD, but literally since its inception many have been trying to get rid of it — so they could use that money for something they deemed more important. They’ll tell you we need to cut the dividend to save it — often while actively promoting billions in tax breaks, tax credits, and tax deductions for massively profitable corporations under the guise that this corporate welfare will somehow — you guessed it — lead to a growth in your PFD. They will tell you there is simply no other way to balance the budget without slashing the PFD — neglecting the fact that no other state in the nation even has a Permanent Fund, and yet they all manage to get by.
They’ll tell you the PFD is a welfare program, that it’s a “handout” or an “entitlement.” It’s not. The legislature’s rationale for enacting the PFD program in 1982 was squarely guided by Alaska’s constitutional mandate requiring the Legislature to enact laws to utilize, develop, and conserve our natural resources “for the maximum benefit of its people.” There is no better way to provide a “maximum benefit” for the people than providing every Alaskan a direct, equal benefit. In fact, the PFD was created precisely to ensure the “equitable distribution” of a portion of Alaska’s mineral wealth would flow directly to the people. The 1982 Legislature’s sense of duty guided its goal to “fairly compensate … state resident[s]” for their share of the “tremendous wealth bestowed upon Alaska by development of [its] oil and mineral resources.”
PFD payouts were never intended to take a backseat to government’s other spending desires. To the contrary, central to the implementation of the PFD distribution plan was the Legislature’s intent that individual Alaskans receive “first call” on the available Fund earnings “regardless of what other uses the income is put to.” This sense that Alaskans deserved the primary benefit of the Fund’s income stemmed from the realization that, at the time, state spending was becoming massive yet “does not benefit all residents equally.” As Rep. Terry Gardiner, D-Ketchikan, testified, “government spending trickles down to citizens as though processed through a sieve.”
Concerned with the risk of increased income disparity often resulting from amassing oil wealth — like that occurring in other countries, where only those of more moderate and affluent income levels tended to reap benefits, the PFD was meant to ensure “everyone gets something,” and to empower “individuals to make their own decisions as to how the money would be spent.” As if foretelling the future, the House Finance Committee in 1982 advised that income inequality in unprosperous economic times was a significant reason it urged the creation of the PFD, which they noted economists had declared was, “the most efficient method of increasing Alaskans’ incomes.”
The policy concerns leading to the PFD program are as valid today as they were nearly four decades ago. A report by the University of Alaska’s Institute of Social and Economic Research explained that in 2015, PFDs “lifted about 25,000 Alaskans out of poverty.” In 2000, the dividend reduced the number of its residents in poverty by almost 40 percent. Not surprisingly then, “reducing or eliminating PFDs to help fill (Alaska’s) budget gap will significantly increase the number of Alaskans below the poverty threshold.”
In 1999, Jay Hammond — governor at the time of the creation of the Permanent Fund and the PFD program — explained that using the earnings of the Permanent Fund in a way that reduced the PFD would amount to a “dividend tax” that was “regressive, unfair and economically imprudent,” for which “Children and other Alaskans with only (dividend) income would pay the same amount as multimillionaires.” He stressed that pressures “to extract new sources of wealth to offset [dividend cuts]” and “to cut spending” would disappear.
Last August, the Alaska Supreme Court ruled against our legal action to preserve your PFD, thus permitting the governor and the legislature to reduce or eliminate the dividend altogether without even changing our existing statutes that mandate full PFD payments. Momentum is now building to use billions of Permanent Fund earnings every year for government with the hollow “promise” of a continued, but significantly diminished PFD. Alaskans have good reason to be skeptical of this as recent analysis shows it financially puts future PFDs at serious risk.
But the people have another reason to be wary. Article I, section 2 of the Alaska Constitution says, “All political power is inherent in the people. All government originates with the people, is founded upon their will only, and is instituted for the good of the people as a whole.” When government feigns ignorance of clear legislative intent in order to subvert the will of the people, its trust with the people is broken. When government willfully ignores a clear existing statutory directive to pay a full PFD and now requires the people to appear before them to beg for their PFDs, that trust is irrevocably broken.
Changing the Constitution is not a matter to be taken lightly. Excess earnings can be used to help in this time of financial crisis, but the people have lost trust that the government will keep its word and actually pay future PFDs. The only way that trust can be restored is by allowing the people to have a say through a vote whether to enshrine the PFD in the Constitution. Considering the tremendous impact the PFD has had on every Alaskan for decades, there are few present proposals that may be as meritorious.
• Sen. Bill Wielechowski is a Democrat representing Anchorage in the Alaska Legislature.
