OPINION: We have a path to PFDs, high-quality essential services and fiscal health

As we all know, the ongoing Permanent Fund dividend debate has turned into a political weapon that contributes to legislative gridlock and diverts attention away from equally pressing policy issues. Alaskans are keen to solve this debate, and so am I. But to find a solution, there needs to be compromise from both ends of the political spectrum.

First and foremost, we must recognize the importance of the PFD. Many families rely on the dividend for help putting food on the table, keeping up with the high cost of living, saving for college, or starting a new business. The PFD is a beautifully unique Alaskan resource that increases economic activity, positive health outcomes and opportunity all over the state.

We must also recognize the importance of providing high quality, essential services and investing in our infrastructure — things that make Alaska a place our kids want to stay, raise their own families, and pursue their own dreams. To do that, we must also continue to grow the permanent fund, which is now the state’s main source of revenue. In fact, 65.7% of the state’s revenue this last year was from the Permanent Fund earnings.

As a first-time legislator, I’ve dedicated much of my time to working across the aisle and balancing the diverse views of my colleagues, district, and experts. I have used what I have learned to develop a balanced compromise in my bill, HB 260.

HB 260 protects the Permanent Fund, creates a realistic path for getting to a 50/50 split, gives the flexibility to provide for government services while affording for a sizable permanent fund dividend as we follow that path to 50/50, and de-weaponizes the PFD.

Here’s how HB 260 works: First, it preserves the percent-of-market-value (POMV) draw, which is a well-accepted, smart money management rule that had been recommended for years before its passage in 2018. Following the POMV protects and grows the Permanent Fund by shielding it from dips in the market or overdraws proposed by the executive branch or the Legislature.

Second, unlike some other proposals that call for rigid and unrealistic percentage splits between dividends and services, my proposal explicitly prescribes a 50% split goal, but doesn’t paint us into a corner should needs change. HB 260 directs that if 50% of the POMV draw (combined with all other existing revenue sources) can flat-fund the previous fiscal year’s baseline government operations and projects, then the remaining 50% of the POMV draw can go toward the dividend. If 50% of the POMV can’t get us to a flat-funded baseline budget, then an additional percentage is used.

Third, to preserve flexibility and de-weaponize the PFD, the baseline budget used for the calculation above is a 5-year moving average with a lag year that is adjusted for inflation and population changes. For example, the budget for fiscal year 2023 would use the average of FY 2017 to FY 2021. This means if the budget is cut, the savings can’t be applied until next year’s PFD calculation. On the flip side, any proposed budget increases would result in a same-year PFD reduction and incrementally increase the baseline.

Together, these features disincentivize haphazard budget decisions to earn political points, encourage budget stability after years of decrements and volatility, and allow for smart budget growth when needed and supported.

If we were to implement HB 260 today and continue to flat-fund the budget, we would have an $1,100 PFD this year, and over the first five years, that PFD would grow to $2,800 (44% of the POMV). Should Alaskans wish to move more quickly on the 50/50 split path and/or improve services, new revenue sources are an option to help us pick up the pace.

Lastly, unlike some other proposals that calculate the PFD using oil revenues, the proposal here avoids attaching the PFD to a volatile index and maintains the pressure to diversify our economy.

We all know that protecting the Permanent Fund, large individual payments that support Alaskans in their endeavors, and robust high quality government functions are all laudable goals. And we can achieve them all without pitting them against one another. I encourage you to remind leadership of that.

Rep. Liz Snyder represents House District 27, East Anchorage, in the Alaska House of Representatives.

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