It’s an election year, which means some legislative candidates are pledging the unaffordable. It’s comforting to know that even as most everything else in life is unsettled by the pandemic, campaign rhetoric can be just as misleading as usual.
I’m talking about the Permanent Fund dividend, which far too many candidates are promoting as a defining issue.
Campaign signs and websites proclaim candidates as protectors of the dividend, often promoting the so-called “full dividend.” And for those who want ice cream on top of their apple pie, some candidates support handing out “back pay” to make up for lower dividends of recent years as lawmakers had to find a compromise for sharing Permanent Fund earnings between an affordable dividend while maintaining schools, roads and everything else that the public wants and needs.
“This is the people’s money,” insists one candidate, suggesting that the Permanent Fund and its earnings belong to individual people rather than the collective public.
The state constitution, however, contains not a peep about “the people’s money.” In fact, the constitution specifically directs that “all income from the Permanent Fund shall be deposited in the general fund unless otherwise provided by law.” The general fund pays for public services and, yes, dividends.
“It is pure greed to take the Permanent Fund dividend,” alleges another candidate, as if spending fund earnings on anything but an individual dividend is the eighth deadly sin.
“It is time the citizens of Alaska weigh in on this disregard for law and retire those representatives who are destroying the PFD and refuse to pay back the money previously withheld,” a candidate’s website says. Fact is, the Legislature this year budgeted $680 million for the dividend, almost $4 billion over the past five years. That’s hardly destruction.
Another legislative hopeful says, “Protect a full PFD and work to return to the people the amounts that have been stolen by the Legislature.” If the money were stolen, the recipients of stolen funds would be required to return the money. Does this candidate suggest that school districts, troopers, domestic violence centers and snowplow drivers return their state funds as reparation for benefiting from a crime?
The so-called “full dividend” of more than $3,000 would cost the state general fund more than $2 billion next year. But as the world stands today, with oil in the low $40s per barrel, the dividend could be zero and the state still would not have enough money to maintain flat funding for schools, the university, roads, prisons and everything else in the budget year that will start in July 2021, according to the Legislature’s latest fiscal analysis.
Budget cuts will be required and, yes, new revenues. It will take a lot of political compromise to reach an affordable dividend and decent public services.
Campaigning on a fat PFD without the cash to back it up is like writing a bad check: Worthless, even though it appears real.
As of May 31 (the most recent financial report available), the Permanent Fund earnings reserve had $8.1 billion in real money available to spend and $1.6 billion in paper earnings that could also be spent, assuming the earnings do not turn into losses in today’s volatile investment market.
There was more in the account, but it’s already spoken for and not available for spending — such as $4 billion that the Legislature — and governor — decided to move from the earnings reserve into the constitutionally protected principal, or the $3.1 billion draw on the earnings to pay for public services and the dividend in the current fiscal year.
As you hear candidates say a fatter PFD is no problem, do the math yourself: Start with $8 billion or $9 billion in the earnings reserve, take out $3 billion per year just to maintain flat funding of services, withdraw an additional $2 billion a year for supersized dividends, figure that investments make money but sometimes not, and you run a risk of emptying the account.
Too many candidates never mention that risk as they promise an unaffordable dividend to win an election. Think about that when you vote.
Larry Persily is a longtime Alaska journalist, with breaks for federal, state and municipal service in oil and gas and taxes, including time as deputy commissioner at the Alaska Department of Revenue (1999-2003) and as an aide to the House Finance Committee co-chair (2009-2010).
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