The PFD needs a permanent fix this year

Effective democracy depends upon citizen engagement — and that, presumably, upon an informed citizenry. I would extend that notion to a citizenry with at least a modest grasp of governmental budgets, the major pillar of governance. Now that the Legislature is in session and we focus on state finances, we should perhaps be mindful of a few notions affecting the budget, the Permanent Fund, and the dividend.

Our governor and too many legislators persist in pushing for an approximate $5,000 PFD again this year, against all logic, fiscal responsibility and common financial sense. This comes in the context of a stunningly imbalanced budget. They apparently care nothing about protecting our state’s most significant investment asset, the Permanent Fund.

Officials professing conservative values in calling out others for socialist tendencies, yet nevertheless push ahead with a hallmark of socialism: giving out free money. In this case, they would give out excessive unearned income to the detriment of public education, public safety, public services for future Alaskans, and the Permanent Fund itself.

Gov. Mike Dunleavy and some legislators should, to a degree, be trying to educate the public on true fiscal and financial market realities, not pandering to the least informed of the constituency. I know that’s a tough job, but it’s worth doing. To too many Alaskans, state budgeting is an abstraction. Those officials who operate in the rhetorical realm should spend more time with nonpartisan legislative fiscal advisers, who exist and are paid in part to educate and advise legislators on budgetary matters. That opportunity to learn is a fantastic tool for all legislators, costing them nothing. Instead of “I’ll fight for you,” it should be “I’ll learn and negotiate for you.”

Some well-experienced Alaskans shoulder responsibility in the fiscal realm, trying to address longstanding structural budgetary shortcomings. The Senate Majority from the 31st Alaska State Legislature is a case in point. Recognizing real-world realities, they knew that we cannot afford an excessive PFD. Sens. Bert Stedman, Natasha von Imhof and Lyman Hoffman, to name a few, are trained and experienced financial experts. Yes, they’re elected public officials, but they bring vision, professional financial expertise, and rational planning to the process. They are aware of threats of further budget chaos if policy is made absent objective, rational, financial considerations.

Other knowledgeable and experienced voices in the public discussion have been, in no particular order, the Institute of Social and Economic Research, Larry Persily, Alaska Common Ground, Orin Seybert, Tim Bradner, and the editorial board of the Anchorage Daily News, among others. Recall that the Anchorage Daily News is owned by one of Alaska’s premier and financially successful Republican families.

Bond bankers and rating agencies represent a degree of reality and objectivity that we cannot deny, given that they influence our cost of borrowing and the image of our financial soundness. They measure by a “best practices” standard of sorts. They have little patience for those who don’t seem to accept the value of developing interest income and enjoying compound interest on something such as our Permanent Fund investments.

Just as we have restructured the Permanent Fund to provide for partial funding of state services, so too should we restructure the PFD payout formula. That job is now in legislative hands. Providing long-term structure for a realistic PFD should be a priority this session. Placing a PFD payment in the state constitution is not the way to go. Recipients of the PFD should not be insulated from awareness of and sharing the risks of market dynamics and varying Permanent Fund income streams.

Over the 41-year life of the PFD payout, the average annual benefit calculates to be around $1,200. The PFD is unearned income, the actual amount of which is never really known until just before distribution time. Promoting or raising expectations for an inordinately large PFD is not responsible. The more we do so now, the worse the impact will be on future generations and the Permanent Fund itself, especially knowing that a large PFD will come from the Permanent Fund Earnings Reserve. Where are those voices now who have railed for years about keeping hands off the Permanent Fund?

I support the PFD program for the reasons it was initially created. I also recognize its importance as the largest annual cash infusion into rural Alaska. I continue to believe, though, that capping the PFD at $1,000 per year is the responsible and sustainable path forward — providing hopefully, for dividends in perpetuity.

Tim Benintendi is a former businessman, bank manager and former Alaska legislative assistant. While serving as state legislative staff, he worked for Republicans, Democrats and an independent, as well as for House and Senate members, urban and rural legislators and members of the majority and minority caucuses.

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