It’s Permanent Fund dividend time, and it’s a big one this year. Cash registers would be ringing all over town — if there were still cash registers. Silent electronic credit card sliders are used now; how boring.
This newspaper had a headline last week about the big economic lift this year’s jumbo PFD will have. There will be some, without doubt. The checks are $3,284 for each eligible recipient, combining the normal PFD of $2,622 with an extra “energy” dividend of $662 per person, according to the Legislative Finance Division, the Legislature’s fiscal analysis group.
The politicians who engineered this are pointing with pride to the total payout of $2.1 billion into the state’s economy.
Of course, we don’t know how much of this will actually be spent in the economy. A lot of it will, but we also know that about 20% to 25% will come off the top and go to the federal treasury through the federal income tax.
We also know a lot of Alaskans simply save their PFDs for retirement or childrens’ or grandchildrens’ college expenses. We know a lot of PFDs are also spent on vacations out of state. We don’t have firm data on savings or vacation spending, but there’s enough anecdotal evidence that we know it occurs.
What happens to the rest? How big of an economic lift is there, really? Fact is, we don’t know.
A few years ago I did a stint teaching at the university and I worked with some economics students on a project to ferret out hard data on the impacts of PFD spending. Surprisingly, we couldn’t find any, except for one thing to which I will return.
Sales tax collections are a good place to look for data, and while most Alaskans live in bigger cities that don’t have sales taxes, many small municipalities do. The PFDs traditionally went out in October or November — they are early this year — but even in towns with sales taxes, we found no bumps in November tax collections.
Undoubtedly, the effect was there. It was just submerged in overall sales tax collections in the years we looked at, which means the impact was minor. We also looked at alcohol tax collections and found no bump either. There may be some hard numbers this year because of the sheer size of the dividend, so we’ll see.
PFDs do help a lot of people, of course. Bankers told me, again anecdotally because the data is private, that consumers tend to get caught up at PFD time if they are behind in payments. The same goes for medical bills. Those are good things.
A lot of Alaskans share their windfall with charity and nonprofits. That’s good, too.
Citizen dividends do a lot of good, but what the research shows, so far, is that they can’t be claimed to really lift our economy. There is some of this, but what really accomplishes a lift is economic development that creates wages families can live on.
Still, we have a big PFD this year thanks to an unexpected surge in oil revenues. What do we do next year? Oil revenues are now falling.
In the real world, politicians would just downsize the PFD. We’ve done that before when circumstances dictate, and the public accepted it.
But in the past two elections, a lot of candidates have, sadly, run on platforms of just delivering big dividends. A lot of them got elected and will claim credit for this year’s PFD, although it was really oil that did it.
My feeling is that most people will accept a lower dividend if revenues decline, but there are still many who will press legislators, and candidates, when they come door-knocking, for a big PFD, such as the so-called “full” dividend, based on an obsolete 1980s-era formula. The “full” PFD would have paid out $4,151 this year, and it came within a whisker of being approved by the Legislature this year. Combined with the energy dividend, that would have meant checks of $4,813 this fall.
What I worry about is that the Permanent Fund will be pressed by politicians next year to make an overdraw on the Permanent Fund Earnings Reserves Account, which supports the dividend along with annual contribution to the state budget. Last year, Gov. Mike Dunleavy pushed hard for an overdraw, but he didn’t get it, thanks to legislators who held the line on protecting the fund.
Which brings me to the Angela Rodell affair. Rodell was the Permanent Fund’s executive director who opposed the governor’s overdraw last year and who was fired by the fund’s trustees, all but one of whom were appointed or reappointed by Dunleavy. The only director not appointed or reappointed by Gov. Dunleavy was also the only one to oppose the firing.
This is a big deal. The implication that politics has influenced management of the fund is serious, and the public has never gotten a satisfactory explanation from the trustees as to why Rodell was fired. In fact, the trustees stonewalled the Legislature in answering questions, although Craig Richards, the chair, did appear at one hearing. Richards was reserved in his answers and didn’t clarify much.
It’s a mystery, because there is nothing in Rodell’s personnel file that would justify the action, legislators who have reviewed it told me. It has been argued that since Rodell is hired by the trustees, they can fire her for any reason. That’s true legally, but the management of the Permanent Fund is so important that the public deserves answers, and they haven’t come.
There will be more coming on this: The Legislative Budget and Audit Committee, an arm of the Legislature, hired a legal team to investigate Rodell’s firing. The report is due to be aired at a committee meeting scheduled Sept. 28. So tune in. I’ll be interested to see if sworn depositions of the trustees, if they were taken, will be made public.
Meanwhile, there is one data point university economics students found on their research on PFD spending: There was a consistent bump in marijuana tax collections at dividend time, indicating a surge in buying.
Pot is obviously a necessity for some.
Tim Bradner is publisher of the Alaska Legislative Digest and Alaska Economic Report.
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