The Alaska Permanent Fund was not created to be a rainy day fund. It wasn't voted in as a dividend fund. The Permanent Fund's original purpose was to prevent the waste of oil money. That function is complete, and now we need to figure out what its next purpose will be.
I was lucky enough to know most of the founders of the fund and to write a book about that history with Dave Rose, the fund's original executive director. As Alaskans consider using the fund in a new way, it's time to clear away the myths that have grown up about its birth, and which are distorting the debate.
The Permanent Fund is our state's best original idea. Its features have been copied and studied around the world. Without it, we would have no hope of resolving our fiscal crisis.
But the fund happened in a weird, unexpected and circuitous way, and maybe the only way it could have happened.
Gov. Jay Hammond, the father of the Permanent Fund (although not its only parent), was a warm and charming man, a delightful companion and steadfast friend to many. He was also a crafty and brilliant player of the long game in politics, by which he got the Permanent Fund he wanted, a fund he intended to pay us dividends.
Hammond had come up with the idea for the dividend in the 1960s when he was mayor of the Bristol Bay Borough. He liked interesting and unusual ideas. He thought ordinary residents should be paid a portion of resource wealth — in Bristol Bay, fish. But the idea went nowhere for the borough and got shot down immediately when he became governor in 1974.
The dividend was an unpopular political idea until after the first checks arrived in 1982. But Hammond never gave up on it. He just stopped talking about it for a while.
For Alaska to elect a slow-growth environmentalist from the Bush as governor was as surprising in 1974 as it would be now. Hammond was a Republican, but, as his friend Clem Tillion says, he was conservative because he wanted to conserve Alaska's resources, money and traditional lifestyles.
"As Hammond used to say, to err on the side of conservation is easily corrected at a later date," Tillion recalled.
The same year, a group of young Democrats won an overwhelming legislative majority as voters responded to Watergate, rapid social change and demands for reform.
At the time, Alaska was running out of money. Anger over the state's financial situation was a burning topic.
In 1969, a sale of oil leases for Prudhoe Bay had brought the treasury $900 million in a single day, an amount of money that had seemed inexhaustible when the entire state budget was barely $100 million.
Tillion and Hammond already wanted to save in 1970. But on the right, politicians wanted to spend oil money on capital projects and loans. Those on the left wanted to spend it on education and health. Both got their way and the budget tripled in two years.
That rate of spending assumed the Alaska oil pipeline would be completed by 1973, bringing more oil income with its flow. But the project took much longer to build and the $900 million began running out. The public asked what had happened to the inexhaustible windfall — how had the politicians wasted it so quickly?
For the most part, the $900 million was used appropriately, but the perception of waste created a moment of opportunity for the savers. In 1975, the new Legislature passed a Permanent Fund bill to save half of any future oil lease payments.
Hammond vetoed it. The bill had been designed as a rainy day fund, with its savings principal available for spending by any future Legislature. He wanted a truly permanent fund, enshrined in the Alaska Constitution by the voters, with savings that could only be accessed by constitutional amendment. And he wanted to save more oil money than just lease sale payments.
The Legislature passed his constitutional amendment the next year. Its two sentences directed 25 percent of all lease sale payments and oil royalties to a fund that could only be used only for income-generating investments. The income alone could be spent by the Legislature.
Nothing was said in the amendment or in the election debate about investing the money safely or paying a dividend. Hammond kept quiet about that. Republicans like newspaper publisher Bob Atwood thought the fund would invest in projects like a Knik Arm bridge and a new state capital city near Willow. Liberals like activist Jamie Love thought it could be invested in day care centers. Businessmen thought it could make loans for their projects.
In an opinion article six days before the vote, Hammond wrote, "There are, of course, several other reasons to support the Permanent Fund, but off the top of my head, at the moment, I can only think of 900 million!"
By letting everyone hold their own idea of what the fund would be, Hammond won a 66 percent vote for the amendment. Since the state had no money at the time, no one really sacrificed to set aside future funds. And the fight could come later to decide the fund's purpose.
Over the next six years, Hammond spent all the political capital of governorship to create the dividend. I'll discuss why in my next column. Difficult legislative battles over those years also made the fund a true savings account that would grow rather than a shaky loan fund or a goody bag for projects. Many of the heroes of that fight are still in our midst. We owe the fund's survival to them.
But the state constitution still contains only those two sentences diverting a share of oil money to a fund with no stated purpose, the income from which is available for spending by the Legislature at any time in any way it chooses.
Alaska's Constitution gives each generation power over its own destiny. The days of big oil money are over, but the wisdom — or accident — of leaders 40 years ago now leaves us in the enviable position of deciding for ourselves what the Permanent Fund is for.
Charles Wohlforth's column appears three times weekly. He is the author of more than 10 books, including as-told-to autobiographies of Walter Hickel, Vic Fischer and Dave Rose. Rose's book is titled "Saving for the Future." Email him at cwohlforth@alaskadispatch.com.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com.