OPINION: It's time to have the hard conversations about the future of the PFD

In my years of teaching and coaching leadership to university students and corporate clients, two observations of poor leadership have stayed with me. The first is what I call “pretending not to know.” A current example is pretending not to know that the state can no longer afford to pay the Permanent Fund dividend. Legislators and the administration in Juneau are going through the annual budget deficit machinations, trying to fund education and critical services but pretending not to know that the solution is to reduce or eliminate the dividend.

All sorts of arm-waving occur whenever one mentions reducing or eliminating the dividend. “It’s in the state’s constitution” is a big one. OK, amend the constitution. Sure, it would be tough. Stop wasting time and get on with it.

That leads to my second observation of poor leadership: the belief that we need a crisis to make tough decisions. Politicians refer to this as “cover.” It’s a way to escape personal accountability. When things are in a crisis, people want to survive, so just about anything can be passed through under the guise of survival. Leaders don’t wait for a crisis. They don’t shy away from tough decisions. They make sure that a crisis does not occur by steering the state into a viable future.

Here’s another thought. Are we already in a crisis and pretending not to know it? Step back for a moment and think about these issues: a systemic decline in the state’s working-age population, years of structural budget deficits, underfunded schools, a decline in oil revenues, a narrowing economy with little hope of anything but stagnation and decline, Permanent Fund trustees warning that we are running out of spendable reserves to support the state’s budget, massive increases in Medicaid spending, disturbing growth in the homeless population, the threat of future power blackouts because of nearly depleted gas reserves in Cook Inlet while a massive gas reserve on the North Slope remains out of reach, and residents of areas like the Mat-Su region being told by officials to “arm up” because police protection is not available for the first line of defense. That feels like a crisis to me.

Some legislators are proposing an income tax to cover the budget deficit. They are pretending not to know that the only reason we would increase taxes is to be able to pay the dividend. They are also pretending not to know that such action would exacerbate the exodus of working residents and weaken an already fragile economy. Let’s face it: The PFD is the most discretionary line item in the budget. No other state gives people money for any other reason than being a resident. There are income-support programs in other states, but these require a “needs” test to be met. At the federal level, the closest analog is the child tax credit. It, however, requires the existence of a dependent child and it phases out as income increases. In Alaska, all you need to do is meet the residency requirement and the PFD check is in the mail. It makes no difference that a person has millions of dollars in the bank, or they earn a million dollars a year — the check is in the mail.

Here’s one way forward: Let’s only pay the PFD to low-income people — people who need it. Households below a certain level of income would get the entire PFD while higher-income households would get none or a graduated reduced amount. For illustration purposes, let’s assume that 50 percent of residents fall above the income threshold. Based on 2023 payments, that would free up nearly $500 million to cover critical needs for the state. Interestingly, when that $500 million is paid to the high-income population, at least 20% of the amount leaves the state and goes to the federal government in the form of income taxes. That’s $100 million, or roughly half of the funding needed for the education bill that recently passed the House.

Let’s stop pretending not to know and waiting around for a crisis that may already be here. Contact your legislators and state government officials. They’re good people and your words and voices matter. Offer your support for them to achieve their full potential as state leaders, leaders they sure want to be.

Al Bolea is a retired leadership trainer and former Distinguished Visiting Professor at the University of Alaska Anchorage. He’s also a retired oil and gas executive.

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