What are the biggest misconceptions about Alaska’s Permanent Fund dividend?

Was the Permanent Fund created to pay Permanent Fund dividends?

No. The Permanent Fund was created to save a portion of the oil wealth coming to the state of Alaska following the discovery of the super-giant Prudhoe Bay oil field. There was no agreement about what exactly the amount saved would be used for in the future when the Permanent Fund was created in 1976 by an amendment to the Alaska Constitution, a process that requires approval by the voters. A review of the record shows that everything from dams to daycare centers to dividends were dangled as possible future uses of the savings to entice the people of Alaska to vote for that constitutional amendment. The most historically accurate explanation of the voters’ intent in 1976 appears to have come from Elmer Rasmuson, the first chairman of the Permanent Fund Board of Trustees: “The Permanent Fund began, chiefly, with a ‘negative’ goal, to place part of the one-time oil wealth beyond the reach of day-to-day spending.”

The Permanent Fund dividend, by contrast, was created in 1982 by the Alaska Legislature through the adoption of statutes, which are laws the Legislature can make without getting approval from voters. The two institutions are fundamentally different. The Permanent Fund is a public savings vehicle, while the Permanent Fund Dividend is per-capita universal direct distribution.

Is the Permanent Fund dividend constitutionally guaranteed?

No. The Alaska Constitution contains no guarantee of any kind that Permanent Fund dividends will be paid. The Alaska Constitution references the possibility of Permanent Fund dividends pursuant to an amendment approved in 1982 that is contained in Article IX, Section 16, but that reference does not constitute any guarantee or requirement of payment.

Has the Alaska Legislature guaranteed the annual payment of Permanent Fund dividends through the Legislature’s adoption of statutes?

No. The Alaska Supreme Court answered this question definitively in 2017 in the case of Wielechowski v. State of Alaska. The Alaska Supreme Court ruled that the Alaska Constitution does not currently allow the Legislature to set up a system in which Permanent Fund dividends are paid in future years automatically. The Alaska Supreme Court stated: “Absent another constitutional amendment, the Permanent Fund dividend program must compete for annual legislative funding just as other state programs.”

Is the Permanent Fund dividend what individual Alaskans got as a trade when the Statehood Act reserved to the state of Alaska the mineral rights to the lands granted by the federal government under the Statehood Act?

No. The Permanent Fund dividend arose as a possible option more than 15 years after Congress adopted the Statehood Act in 1958. The Statehood Act provides that the “mineral lands” granted by the federal government to the state of Alaska pursuant to statehood are granted under the express condition that all sales, grants, deeds or patents of those lands must be reserved to the state. This provision means Alaskans cannot receive royalties as individual landowners from development of those mineral lands. I was as close as anyone to the discussions in the Alaska State Legislature in 1982 about the Permanent Fund dividend, and I do not recall this argument regarding the Statehood Act ever coming up then. This argument linking Permanent Fund dividends to the Statehood Act apparently first emerged some years after Permanent Fund dividends were created in 1982.

Cliff Groh was the primary legislative assistant on the bill in 1982 that created the Permanent Fund dividend we have today. He is also a lawyer who has litigated constitutional issues. Some material here overlaps with a chapter he co-authored with Gregg Erickson for the book “Alaska’s Permanent Fund Dividend: Examining Its Suitability as a Model.”

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