Skip to main Content
Opinions

Don’t enshrine Alaska’s PFD in the constitution

  • Author: Paul Jenkins
    | Opinion
  • Updated: January 13
  • Published January 13

It is an election year and the mini-stampede to protect at all costs the Permanent Fund dividend — Alaska's expensive homage to lousy public policy — by enshrining it in the Alaska Constitution continues unabated.

This time around, the charge is led by Sens. Bert Stedman, R-Sitka, and Tom Begich, D-Anchorage. They have pre-filed Senate Joint Resolutions 9 and 10 that would, among other things and with voters' approval, constitutionally guarantee a dividend. Last year, Democratic Rep. Chris Tuck and Republicrat Gabrielle LeDoux were the notion's frontfolk.

In short, Stedman's offering would appropriate at least 2 percent of the average market value of the fund's balance, based on a five-year average, for dividends, leaving an additional 2.5 percent for appropriation to the fund itself or to the general fund. Begich's proposal would take 5 percent of the fund's market value over a five-year average and use 40 percent of that for dividends.

While I find myself often ambivalent about the dividend, it is difficult to forget it is — and was when narrowly hatched in 1980 — a remarkably sketchy idea for a buffer to shield the state's oil wealth account. Free money may be a great idea, but it is horrendous public policy. Nonetheless, Gov. Jay Hammond believed Alaskans would fight like honey badgers to keep the fund safe and out of the grasping fingers of politicians to ensure the annual checks. He was never more right.

Unfortunately, the payouts — and, really, who could have seen it coming? — quickly became the tail wagging the dog and today are embraced as entitlements by many who should know better. Dividends are not even mentioned in the 1976 constitutional amendment passed by Alaskans to set up the Permanent Fund as a way to protect burgeoning oil revenues and help pay for government when oil money dried up.

PFD Technician Shilo Franklin, left, helps people process their Permanent Fund Dividend applications at the downtown Anchorage PFD office on Thursday, March 31, 2016. (LOREN HOLMES / ADN archive 2016)

Through thick and thin, the dividend program worked swimmingly until 2016, when Gov. Bill Walker vetoed $696 million of the $1.4 billion appropriated by the Legislature for dividends. He did it to get lawmakers' fiscal attention. Not to be outdone, the Legislature last year capped the payment at $1,100, about half of what it should have been. The money is not being used for government, but remains in the $13 billion Permanent Fund Earnings Reserve.

Count me among those who would rather see Alaskans, especially me, receive the dividends rather than letting the dough fall into the hands of spend-crazy politicians. Count me among those who understand cutting the dividend, or capping it, is a vicious form of regressive taxation on Alaska's less fortunate — and an economy deflator. But count me also among those who understand that protecting the dividends in the constitution will cause not just headaches, but migraine-level headaches.

For the time being, Alaska, with a stretch here and a dab of savings there, has enough money to underwrite government and some level of dividends, but the state depends on volatile natural resources extraction industries — mostly oil — for its cash. Alaska historically has a boom-or-bust economy dependent on factors well outside its control. Given that, how can we afford to constitutionally promise Alaskans a dividend?

What happens if oil prices tank, or the industry goes bust, or somebody finally invents the perfect battery, making oil today's buggy whip? What if there is not enough revenue to pay for government and dividends? If the dividend is locked in at a specific level in the constitution it must be paid at the expense of other government functions. Period. What about education — mandated by the constitution, but at no fixed expenditure — or public safety, or public health? What will we decide to do without in order to pay dividends?

The impetus to lock up the dividend in the constitution entirely is understandable given Walker and the Legislature's high-handed grabs of the last couple of years. Those unprecedented impoundments, after all, sucked more than $1 billion out of the state's economy and Alaskans' pockets — during a recession, no less.

It could be argued that enshrining the dividend at no specific amount in the constitution might do little harm. But, really, why bother?

The dividend remains the third rail of Alaska politics and the system in place today for determining whether there will be a dividend — and how much it will be — has sufficed since 1980, with two exceptions. Rather than saddling the state with unnecessary, hamstringing verbiage in the constitution, Alaskans would be wise to leave things as they are and deal harshly at the ballot box with politicians who grab their dividends.

At any other time, it would be easy for proponents of enshrining the dividends in the constitution to see the status quo as the best course, but it is, after all, an election year.

Paul Jenkins is editor of the AnchorageDailyPlanet.com, a division of Porcaro Communications.

The views expressed here are the writer's and are not necessarily endorsed by the Anchorage Daily News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@adn.com. Send submissions shorter than 200 words to letters@adn.com or click here to submit via any web browser.

For more newsletters click here

Local news matters.

Support independent, local journalism in Alaska.

Comments