OPINION: Big dividends mean important priorities are underfunded

The State of Alaska recently paid out more than $2.1 billion in Permanent Fund dividends, including $400 million in “energy relief.” At the same time, the Anchorage School District announced it will need to close schools and eliminate some programs, such as athletics and language immersion. With inflation raging, state government has not changed the K-12 funding formula in more than five years. The state funding for school operating budgets is frozen in time. But no one is going to use their personal dividend to fund schools.

Alaska has one of the highest teacher turnover rates in the country. Because of low pay and an inadequate retirement system, we have a teacher shortage, with classrooms continuing to get more and more crowded. No one is going to use their dividend to pay teachers.

Businesses here are having a hard time finding workers with sufficient skills. No one is going to use their dividend to fund job training programs.

There is the humanitarian crisis of homelessness flooding our community. No one is going to use their dividend to address homelessness.

Similarly, no one is going to use their dividend to address the housing shortage, fund state troopers, or for storm recovery in Western Alaska. This is not to undermine the considerable philanthropy that comes out of the dividend program. But the “Pick.Click.Give.” program has historically resulted in far less than 1% of the total dividend paid out being donated.

The source of the dividend is the Earnings Reserve account of the Permanent Fund. This account is also the primary source of state spending for essential public services. The account is a fixed amount of money. Resources spent on dividends cannot be spent on services. This is underscored now, where declining stock market values and oil prices will leave the state treasury even more depleted. No other states or nations with large savings accounts pay dividends.

For low-income people, the dividend is a valuable tool for dealing with financial duress. There are about 50 state and municipal programs around the United States that pay universal basic income directed at disadvantaged individuals and families. But $1 billion of the September payout went to the richest half of Alaskans.

Looking at his gubernatorial campaign ads, it appears that the main thing Gov. Mike Dunleavy has to offer is big dividends. He says, “I have always maintained that the people know how to spend their money better than the government does.” However, it is not an issue of who can spent the money better. It is an issue of spending the money on different things.

Dividends are generally spent on personal goods, while public services are spent on collective goods, where everyone contributes and everyone benefits. No one will use their dividend for collective goods, because people will not invest in things where the primary beneficiary is mostly someone else. I will not use my dividend to fix a pothole on my street, because more people will benefit than I will.

Dunleavy’s campaign represents a cynical view of politics. It’s easy to play into the instant gratification of quick and easy cash to get votes. It is easy to ignore how government is the delivery system for many of the needs of society such as schools, roads, justice and health systems, and how housing, energy, food, and health can be provided to multiple households more efficiently. It’s easy to ignore what these mean for Alaska’s economy and society over time, and how long-run systematic cuts to services impact the quality of life. It is easy to ignore all these things. But that is not governing.

Roger Marks is an economist in private practice in Anchorage. From 1983-2008, he was an economist with the State of Alaska Department of Revenue Tax Division.

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