In the late 1970s and early 1980s, I was a new legislator in the state House of Representatives during the development of the corporate structure for the Alaska Permanent Fund. I was involved in the process that created the investment and inflation-proofing policies and defined the dividend payment program.
Hearings were extensive, with many participants and legislative leaders like Hugh Malone, Clark Gruening and Terry Gardiner. Elmer Rasmuson made a convincing argument for keeping the investment criteria conservative and to inflation-proof the fund. Gov. Jay Hammond advocated strongly for individual dividends.
Hammond's bottom line was to individualize a portion of the benefits of the owner state and build a constituency to protect the Permanent Fund. Economists like Milton Freedman and dedicated staff framed the debate and the system we created became an international model of success.
Many of those who opposed the creation of the fund wanted it to become a development bank for megaprojects and loans. They were against inflation-proofing and dividends because it meant less government money for spending. Hammond's leadership, Rasmuson's advice, and Dave Rose's management experience aligned with public support and after many meetings with combined efforts, the Permanent Fund system of the past 35 years was agreed upon.
Since inception the Permanent Fund dividend has put $23 billion into the Alaska economy through equal individual choices. During the same time, state political choices have spent close to 10 times that amount. One third of the entire current deficit can be eliminated if the oil "tax" credits were repealed, but that's another subject.
The defense of the PFD and the fund itself has been an ongoing task, particularly when state revenue projections changed. Alaska Govs. Bill Sheffield, Steve Cowper, Wally Hickel, Tony Knowles and Frank Murkowski all proposed cutting dividends. Knowles agreed to put the question on the ballot in 1999. When the beneficiaries of Alaska's political system (left or right) need money, they target the PFD.
Over the years, there have been common elements to the attacks on the dividend. Unfortunately, sophisticated polling, focus groups and consultants have honed the message to say, "We must restructure the Permanent Fund dividend to protect it." Their "protection" means repealing the dividend law, cutting dividends in half and eliminating the PFD's clear connection to the fund itself.
The argument that we must do this right now, when we have huge reserves and rising oil prices, is very questionable, as it has been in every past PFD attack.
Sixteen years ago three former governors wrote in support of cutting the dividend in half for state spending. In the Official Election Pamphlet, their statement of support said:
– "Guarantee your dividend with a YES vote."
– "Vote YES and guarantee your dividend for decades to come and put Alaska back on the road to financial responsibility."
– "Vote no and lose your dividend. It will quickly disappear and the Permanent Fund will shrivel in value."
Sounds like today's doublespeak.
Hammond responded: "Before voting, ask yourself:
"1. If more money is needed should ONLY Alaskans pay? Or should the more than a million tourists and thousands of non-resident commercial fisherman, pipeline and construction workers who come up here to work or play pay at least something?
"2. If only Alaskans pay, should all pay the same regardless of income? And
"3. Do I trust government to do a better job of spending $500 of my dividend than I would myself?"
The 1999 ballot proposition failed. And since then, dividends put another $10 billion dollars into diversifying Alaska's economy through private individual choices and the Permanent Fund doubled in value.
The PFD is working. The Permanent Fund is a great economic engine putting billions of dollars into the state and is still a worldwide example of success cited by notable economists, including Nobel Prize winner Vernon Smith and Gov. Hickel's grandson, Jason Hickel, a post-doctoral fellow at the London School of Economics, who is advocating a Permanent Fund system for Sudan. The World Bank is on record encouraging Permanent Fund systems for countries dealing with resource wealth on behalf of their people.
The PFD "Destruction" Act currently being considered by the Legislature will take money from average Alaskans to fund hundreds of millions of dollars in giveaways and political choices. This combination will create the greatest conflict between the "haves" and the "have-nots" since statehood and will define the success or failure of state politicians for years.
I strongly encourage House members to vote no and save the Senate from their own political suicide, and to save the governor from the terrible advice he is getting.
Rick Halford is a former state legislator representing Chugiak and Eagle River and former president of the Alaska Senate.
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