"Don't you dare touch my PFD!"
With oil revenues at an all time low, rhetoric about Alaska's Permanent Fund dividend is at an all time high.
It would appear that a bit of history lesson is in order in regards to the Permanent Fund, the Permanent Fund dividend program and why they were created.
The Permanent Fund was set up as a "rainy day" account when Alaska started collecting revenues from oil production. In 1976 voters overwhelmingly approved an amendment to the Alaska Constitution creating the Alaska Permanent Fund.
It wasn't until 1980 that the Legislature created the Permanent Fund Corporation to manage the assets of the Permanent Fund. Checks for $1,000 were distributed from excess oil revenues, as opposed to realized earnings of the fund, as they are now.
The "Permanent Fund" has two accounts -- the principle and earnings reserve. The Alaska Constitution protects the principle, but the earnings reserve, where realized earnings are stored, is available to the Legislature by only a simple majority vote. The constitution states "At least 25 percent of all mineral lease rentals, royalties, royalty sales proceeds, federal mineral revenue-sharing payments and bonuses received by the state be placed in a permanent fund, the principal of which may only be used for income-producing investments."
A 1990 constitutional amendment created the Constitutional Budget Reserve. Article XI Section 17 of the constitution states "all money received by the state after July 1, 1990, as a result of the termination, through settlement or otherwise, of an administrative proceeding or of litigation in a State or federal court involving mineral lease bonuses, rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments or bonuses, or involving taxes imposed on mineral income, production, or property, shall be deposited in the budget reserve fund."
Legislators can access the money in the CBR with a two-thirds vote in both houses to help balance the budget, and they have done so in years past. The CBR currently holds $8.5 billion; with about a $3.5 billion to $4 billion dollar budget gap, the fund can only help fill that gap for a couple more years before it runs dry.
The electorate, however, still does not seem to grasp the scope, or the reasons for the current fiscal gap. Social media responses to news stories overwhelmingly resound with the sentiment, "Don't touch my PFD."
It's popular, especially in an election year, to stand up and pretend to protect the PFD for future years. Those legislators and supporters can make up numbers and tell you if the dividend is $2,000 next year and we cap it at $1,000, then we are taking $4,000 a year out of the income of a family of four. That's great rhetoric, but its only part of the story.
Different plans have been proposed over the years, but the hard truth is this -- the Legislature cannot fix the budget gap with cuts, it's just not possible. When the CBR runs dry, the earnings reserve is the next available pot of money. If the Legislature starts pulling cash from the earnings reserve out of necessity, without a long-term plan, the damage to the future of the PFD is much greater than if they have a plan in place to protect a portion of the dividend.
Regardless of whether people believe the PFD is being protected or not, the stalling and obstruction of those opposed to capping the PFD is only leading to a worse outcome. When the Legislature runs the CBR dry, they will have no choice but to start dipping into the earnings reserve to fund government. Either way, the PFD is going to face a certain harsh reality soon.
It's an election year, so nobody wants to do anything controversial. While we are in the deep in this fiscal crisis, on Monday the Alaska Senate Majority congratulated itself via Twitter, "The Alaska Senate unanimously passed HB 128, establishing August 10 of each year as "Alaska Wild Salmon Day."
Downplaying the issue, and failing to do anything to fix it this session, or for the last decade for that matter, is flippant and almost seems like a joke to those we elected to handle such things with grave importance. Alaska needs a long-term fiscal plan. However, it was ignored for more than a decade by many of the legislators who are now in leadership positions. The time has come for some tough decisions and a little less pious rhetoric from the same people who helped create this crisis in the first place.
Mike Dingman is a fifth-generation Alaskan born and raised in Anchorage. He is a former UAA student body president, and has worked, studied and volunteered in Alaska politics since the late '90s. Email, michaeldingman@gmail.com.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com or click here to submit via any web browser.