Many of our legislators this year and in recent years have stated that the Permanent Fund dividend is not sustainable; therefore, the PFD should be reduced or eliminated. Other legislators and Gov. Mike Dunleavy have pushed to pay a full PFD, as dictated by Alaska law. What is the right thing to do? I have thought about this a lot during the past few years as the arguments have been building over this issue. I have friends on both sides of this argument and have been swayed by all their arguments in both directions. I am an engineer, and my job is to find solutions that allow systems to work correctly. Look at all the parts of the system long enough and deep enough, and solutions can be found. To do this, one needs to find out which claims are correct and which are not correct.
First, the idea that the PFD is not sustainable is incorrect. We have nearly 40 years of evidence that shows how the PFD has been paid out according to the statutory formula every year. This, by definition, is sustainability, and as long as no one messes with the PFD, it will remain sustainable, in varying amounts over the years. Further, the PFD provides more economic benefit to the state of Alaska when paid fully to all those registered to receive it. Milton Friedman advised Jay Hammond that the PFD payout to individuals was the way to keep the money out of the hands of special interests and that putting the money toward infrastructure of the state would develop a special group of special interests. Providing payment directly to the citizens results in the best economic benefit for this PFD.
What is not sustainable is Alaska’s budget, because the annual budget exceeds the annual revenues. The solution is simple: Decrease the budget or increase the revenue, and that is what the battle really is. However, the battle changed when legislators and Gov. Bill Walker decided that pilfering the statutory PFD and redirecting the robbed funds to the state budget would solve the budget problem. For whatever reason, none of them had the courage or the wisdom to find ways to decrease the budget by enough to make it balance, but they knew it was going to be an uphill battle to get more revenue without first decreasing the budget.
Along the same lines of reasoning, the state of Alaska does not need to fund scholarship programs, but a full PFD allows people to save up for their own education or contribute to whatever scholarship programs they choose. Those who dislike the PFD or are principally against it can still receive it and give the entire amount away through “Pick. Click. Give.” or by any other manner they choose.charities should not be receiving funds from the government, but the members and supporters of those organizations should step forth and offer aid to those who have real need. When the government gets in the way or usurps charitable roles, the volunteers are discouraged from their charity because it is “not their problem” anymore. For this reason, we should remove the social programs from the state budget and let the individuals in our state give to charities and needful people of their choosing. If Alaskans receive their full PFD, they will have more money to give. Also, if helping needy people is a priority, with a full PFD, the seniors would receive more money than they would through the senior benefit program, and other people of low-income status would receive more monetary help overall.
Along the same lines of reasoning, the state of Alaska does not need to fund scholarship programs, but a full PFD allows people to save up for their own education or contribute to whatever scholarship programs they choose. Those who dislike the PFD or are against it in principle can still receive it and give the entire amount away through “Pick.Click.Give.” or by any other manner they choose.
Pay the full PFD, cut the budget and both would be sustainable. The programs that get cut either need to go away or other ways to be funded must be found. There are some programs in the state that should receive some state funding but need to eliminate waste from their inflated budgets and be content to receive what is reasonable. The private sector took a huge economic hit a few years ago, and the affected businesses had to make deep cuts or even close their doors. Many of these affected businesses and people turned to ingenuity and innovation to find new ways to perform old tasks, or they found new markets for their skills and products. Necessity is the mother of invention. Government agencies can also be ingenious and innovative.
The PFD should not be the last check written but the first check written. We should match the state budget to the revenue on hand and leave the PFD alone. If we need more revenue, the state needs to be encouraging entrepreneurial activity and innovation to diversify and grow the economy instead of stifling growth by implementing individual income taxes and state sales taxes. The issues with the PFD have nothing to do with the budget, are not “something for nothing,” are not socialistic, and are not a matter of good fiscal practice. Instead, the argument for leaving the PFD alone has everything to do with the citizens of Alaska who ask, “Why mess with something that has worked for 40 years?” These are Alaskans who trusted the leadership and Legislature of the state to keep the PFD intact.
The PFD was a way to for the citizens of Alaska to share in the wealth derived from Alaska’s resources. People who were citizens of Alaska before statehood and before the discovery of oil and gas within Alaska earned the benefit of the PFD by building Alaska’s initial foundations. Those who either lived in Alaska as recent immigrants or who have been here for many generations, are and were here to develop the supporting infrastructure for the oil and gas industries and to help those who have come north to build and operate the facilities in Arctic and sub-Arctic conditions. The oil industry brought new prosperity to Alaska and continues to supply revenue to date. Those who have moved to Alaska since the PFD began are also deserving of the PFD if they are here working to make Alaska a place that is “open for business.” All Alaskans have made their investments by being here and working to benefit their fellow Alaskans. If the PFD needs to change to account for changing conditions, work it out with the people and change the law accordingly, but pilfering it to cover a deficit is not acceptable.
Robert Seitz, P.E., is an electrical engineer. He has been an Alaska resident for more than 75 years and supports innovation, ingenuity and hard work.
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