For 40 Years, Alaska Has Modeled a Universal Income. Now That’s in Peril.

Is the way to save the dividend through taxing the rich or slashing state services?

Yereth Rosen November 5, 2018

A bumper sticker opposing cuts to Alaska’s Permanent Fund Dividend, an annual payout to every Alaskan from the state’s oil-wealth fund that many have compared to a universal basic income. (Photo by Yereth Rosen)

On Sep­tem­ber 29, at the third annu­al PFD Trav­el Fair, trav­el com­pa­nies set up booths to tempt Alaskans with ways to spend their Per­ma­nent Fund Div­i­dend (PFD) — their pay­out from the state’s famous oil-wealth fund. This year’s PFD amount­ed to $1,600 per res­i­dent. Ven­dors hawked local glac­i­er-view­ing tours and South Pacif­ic vaca­tions. A band played blue­grass favorites. Alas­ka Air­lines gave out sug­ar cookies.

The PFD is the product of a particularly Alaskan philosophy—an egalitarian and, some say, socialist streak that regards the state’s natural resources as commonly owned.

The Alas­ka Per­ma­nent Fund, now worth $65 bil­lion, is a sov­er­eign wealth fund, a gov­ern­ment owned invest­ment fund intend­ed to benef it cit­i­zens. These funds exist most­ly in oil-rich places like Nor­way, Kuwait and Alber­ta, and are used as sav­ings accounts or to fund gov­ern­ment oper­a­tions. Alaska’s is the only one to make direct pay­ments to cit­i­zens. Almost all res­i­dents, includ­ing chil­dren, are eligible.

The Per­ma­nent Fund was estab­lished by a state con­sti­tu­tion­al amend­ment in 1976, just before oil began flow­ing down the trans-Alas­ka pipeline. The PFD pro­gram, begun six years lat­er, injects cash into the econ­o­my (about $1 bil­lion in 2018), and many busi­ness hold spe­cial PFD sales. The pay­outs are used for col­lege sav­ings — Alaskans can ear­mark half or all of their annu­al div­i­dends into a Uni­ver­si­ty of Alas­ka-affil­i­at­ed sav­ings plan— retire­ment accounts, char­i­ty dona­tions and, for many, basic expens­es. Stud­ies show it has reduced the state’s pover­ty rate.

Out­side of Alas­ka, the PFD has gained atten­tion as an exam­ple of the ben­e­fits of a uni­ver­sal basic income.

The PFD is the prod­uct of a par­tic­u­lar­ly Alaskan phi­los­o­phy — an egal­i­tar­i­an and, some say, social­ist streak that regards the state’s nat­ur­al resources as com­mon­ly owned. The div­i­dend con­cept is based on Alaska’s Con­sti­tu­tion, which holds that Alaska’s nat­ur­al resources are owned, not by the state, but by the Alaskan peo­ple them­selves,” wrote Jay Ham­mond, the Repub­li­can gov­er­nor cred­it­ed with cre­at­ing the div­i­dend, in his 1994 mem­oir, Tales of Alaska’s Bush Rat Governor.

Now Alaskans are grap­pling with pro­found ques­tions about the dividend’s future and, by exten­sion, the state’s. Two years before the div­i­dend began, when Alas­ka was awash in new oil mon­ey, leg­is­la­tors abol­ished Alaska’s income tax. Now those heady oil-boom days are over, leav­ing mas­sive holes in the state budget.

The annu­al div­i­dend announce­ment used to fea­ture a tele­vised enve­lope-open­ing cer­e­mo­ny, where the rev­enue com­mis­sion­er or gov­er­nor would reveal on live tele­vi­sion how big the year’s PFD would be. But that turned sub­dued in 2016, when Gov. Bill Walk­er (I) held a press con­fer­ence to explain why — with a $4 bil­lion bud­get deficit — he felt oblig­at­ed to veto half of the div­i­dend pay­out, leav­ing just $1,022 per Alaskan. The fol­low­ing year’s div­i­dend was $1,100, well below the 2015 peak of $2,072.

This year, for the first time, the leg­is­la­ture dipped into Per­ma­nent Fund earn­ings to pay gov­ern­ment oper­at­ing expens­es. As a com­pro­mise, law­mak­ers agreed to mod­est­ly increase the div­i­dend, to $1,600. There was no enve­lope ceremony.

The div­i­dend changes have shak­en Alas­ka pol­i­tics. Walker’s deci­sions, some experts say, gut­ted his approval rat­ings. On Octo­ber 19, he dropped out of this year’s guber­na­to­r­i­al elec­tion. Some Alaskans, most­ly on the Left, want to rein­state the income tax to shore up the state’s cof­fers and keep the PFD strong, argu­ing that div­i­dend reduc­tions hurt the poor the most. Anoth­er group, rep­re­sent­ing a range of polit­i­cal per­spec­tives, believes div­i­dend cuts are a tough but nec­es­sary part of mov­ing Alas­ka away from its per­ilous oil-mon­ey dependence.

Many on the Right agree with the Left’s desire to pro­tect the PFD, but instead of sup­ple­ment­ing the bud­get with an income tax, they argue for slash­ing state spending.

In this last group is Repub­li­can Mike Dun­leavy, run­ning for gov­er­nor against a Walk­er-endorsed Demo­c­rat. Bill Walk­er raid­ed the Per­ma­nent Fund and took half of your PFD to pay for bloat­ed state bud­gets,” Dunleavy’s cam­paign web­site says. The PFD belongs to you and your fam­i­ly — not to him.”

Scott McMur­ren — the long­time news­pa­per colum­nist and trav­el expert who orga­nized the PFD Fair — acknowl­edges that Alaskans are fac­ing tough choic­es. But among many Alaskans, he says, there’s a sense of, I think, feel­ing enti­tled to the div­i­dend with­out a cor­re­spond­ing sense of respon­si­bil­i­ty to our state, our infra­struc­ture, our chil­dren, the arts. … If all you eat is cook­ies and ice cream, well, after a while your guts are going to rot.”

Yereth Rosen is a long­time reporter based in Alaska.
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