Paying a dividend was not the original intent of the Permanent Fund

As Alaskans debate Gov. Mike Dunleavy’s proposed budget, which includes a $3,000 Permanent Fund dividend and “payback” dividends totaling more than $3,600, we often hear comments about the “right” to receive a dividend. History shows, however, that the payment of dividends was not part of the debate when we amended the Alaska Constitution to create the Permanent Fund.

In 1976, the Legislature asked Alaska voters whether to amend the state constitution by adding Article IX, Section 15 to establish a Permanent Fund, “into which at least 25 percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State would be paid.” The principal of the fund would be used “only for income-producing investments,” and the investment income would “be deposited in the general fund and be available to be appropriated for expenditure by the State.” Alaskans hotly debated the merits of creating a sovereign wealth fund — the first of its kind among the 50 states — but paying dividends to every Alaskan was never part of the debate.

The voter’s pamphlet from 1976 included statements for and against creating the Permanent Fund. The statement of support, authored by the Alaska State Chamber of Commerce, described how a “wise and prudent family sets aside money in a savings account for the future” and stated that the Permanent Fund is a “rainy day fund to benefit this and future generations of Alaskans.” The state chamber suggested that the Permanent Fund would be a way to fund state government when finite oil and gas resources had been depleted. In addition, supporters believed that the fund would help hold the line on state spending by placing a limit on the amount of oil revenue lawmakers could access. It would force elected officials to “pause, reflect and research” a proposal before “blindly authorizing expenditure of taxpayers’ monies.”

Tom Fink, a former state legislator, wrote the pamphlet’s statement in opposition. Fink did not believe that the Permanent Fund would “cut back expenditures of state government” and suggested that the only restraint on the state budget “will be to elect fiscally responsible people.” He feared that with a sovereign wealth fund, “Congress will change revenue sharing formulas so that Alaska will be cut back.” And he contended that the best use of surplus state funds included paying cash for capital improvements and increasing revenue sharing to local governments. Fink criticized talk of making the fund available for credit “for such things as home mortgages,” but he said nothing about paying dividends to Alaskans.

Four years later, when Ron and Penny Zobel challenged the new law that allowed payment of dividends from the Permanent Fund earnings, the Alaska Supreme Court affirmed the original intent for the Permanent Fund. The court explained that voters created the Permanent Fund to address two specific concerns: first, that when Alaska’s finite oil and mineral resources became depleted, Alaskans would face “the choice of either terminating certain governmental programs or continuing them through increases in taxation” — and second, that the Legislature would use the sudden influx of oil revenue for “costly, wasteful, and unnecessary government projects.” The court predicted that with future oil revenue decline, population growth and increase in the size of Alaska’s government because of population growth, future Legislatures “are likely to find that it will be impossible to pay dividends because all the interest from the permanent fund will be required to pay the costs of general government.”

Thus, in 1980, the Alaska Supreme Court predicted the very debate we are having today: whether to use Permanent Fund earnings to pay for government services or to pay a $3,000 dividend and drastically reduce government services. Based in part on the original intent for the Permanent Fund as a “rainy day” fund, the court believed that using Permanent Fund earnings to pay for government services would be the higher priority and that the practice of paying dividends would eventually come to an end.

History teaches us that paying dividends was not the original intent of the fund and there is no constitutional right to receive a dividend payment from the Permanent Fund. It also shows that creation and management of the Permanent Fund has always involved spirited debate in Alaska. The current budget debate is already shaping up as a critical time in Alaska history and asks all of us to determine the priorities for our families, our communities, and our state, and make sure our voices are heard.

Rep. Matt Claman, D-Anchorage, was elected to the state House of Representatives in 2014. He has served on the Anchorage Assembly and also as acting mayor of Anchorage.

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