Governor Jay Hammond fought hard to create the Permanent Fund dividend program in order that a portion of one-time oil wealth will be shared equally with all future Alaskans. He specifically stated that earnings from the fund belong “to the people, not the government.” Now in the face of a $3.5 billion shortfall, Governor Walker’s Sovereign Wealth Plan (SB 128) and Senator McGuire’s fiscal plan (SB 114) propose to solve this problem by rewriting State laws such that the incredible economic engine of the Permanent Fund will no longer be working for the people, it will be working for government.
In both plans, future dividends eventually lose value because they are tied to oil royalties. Once oil can no longer be profitably pumped down the Alyeska pipeline (now at ¼ capacity), royalties will end and so will the dividend. Senator McGuire’s plan promises $1,000 from the general fund, but there are two problems with this idea. First, no statute can bind a future legislature, and second, inflation will eventually destroy McGuire’s $1,000. Given the same rate of inflation since the first dividend in 1982, a $1000 dividend distributed one hundred years from now will be worth $153, on its way toward zero with the passage of time.
In the recent statewide Senate hearing Alaskans strongly argued to preserve the Permanent Fund dividend while cutting the budget. Most Alaskans favor a state income tax so it should be enacted now. About 45 percent of households nationwide pay no Federal income tax and so would pay no state tax. In order to spread the burden of paying for government expenses, a small state sales tax is almost certainly necessary. That way, all Alaskans and our visitors would share in paying for services.
The main effort must be to reduce the size of the state budget but this is difficult and takes time to accomplish intelligently. To give the legislature time, our dividends must be shared temporarily with government. Our legislature presently has complete control over the dividend payout. They can fund a smaller dividend during this crisis and appropriate the remaining earnings to close the budget gap, giving us time to find ways to cut the budget.
The Permanent Fund dividend is a powerful idea and therein lies its greatness. The dividend idea is that all future Alaskans share equally in one-time wealth creation; there is no “privileged class.” Just as the idea of democracy liberates the individual from powerlessness over governing his own life, the dividend idea liberates the individual, in a modest way, from controlled or no access to a share of the wealth inherent in our land and in our social contract. We live in a wealthy state; the dividend defines us as owners of this wealth. The dividend concept is unique among modern societies; a grand experiment, one whose value we are only just beginning to comprehend. This idea goes way beyond just getting a $1,000 check.
If you are concerned about inequality in modern society, the Permanent Fund dividend might be the only curative solution that all of us can believe in regardless of political persuasion. We must not let this grand experiment disappear into history. Please support Senator Wielechowski’s SJR1 to protect the dividend.