EDITORIAL: The reversal of Jay Hammond’s Permanent Fund dream

As the Alaska House of Representatives flew through a one-day special session and swiftly signed off on a Senate budget with a narrowly tailored capital package aimed at swaying key votes, there was no meaningful debate, no delay and, most notably, no mention of the topic that has consumed much of the oxygen in the halls of the Capitol since January: the size of the Permanent Fund dividend.

When then-Gov. Jay Hammond envisioned in the late 1970s the program that would become the PFD, he called it “Alaska Inc.,” a nod to the idea that residents would be shareholders in the ownership and stewardship of the state’s resources. Hammond proposed that Alaskans receive an annual payment of a flat $50 multiplied by their years of residency, a formula that was found by the U.S. Supreme Court to violate the Equal Protection Clause of the Constitution. The state reconfigured the formula for payments starting in 1982 to be based on Permanent Fund earnings instead, and the die was cast. It was an inconsequential change at the time, but the shifts in Alaska’s income in the decade since — away from big oil surpluses to waning revenue while investments prosper — have distorted the role of the PFD beyond recognition.

As with the Permanent Fund itself, Hammond’s goal with the dividend was to use Alaska’s oil wealth to help provide financial security for Alaskans, and in doing so give residents a reason to keep a close eye on how state government managed its resources. Alaskans would be more inclined to keep their representatives honest, Hammond reasoned, if they had a personal financial stake in the matter.

Unfortunately, the connection between PFDs and state government’s performance has proven over time to be too tenuous for many Alaskans to grasp. It turns out that the only function of government that motivates a fair swath of residents is the PFD itself, and their preference is for it to be as large as possible, even at the expense of other essential functions such as education, transportation and public safety. In this way, it has become a de facto entitlement program, despite the furious protests to the contrary by mega-PFD proponents who deny that they would ever take a government handout. Alaska has run the modern era’s longest real-world trial of universal basic income, and the results are clearly on display.

The destructive nature of the PFD-over-everything mindset was less obvious during the Prudhoe Bay boom, but with North Slope revenue on a long, slow decline, the tradeoff between big PFDs and other things Alaskans might want, such as safe roads and good schools, has become all too apparent. In legislative committee hearings this session, some mega-PFD supporting legislators’ thinly disguised enmity toward other government services made it clear that they would prefer to cut non-PFD items to the bone in order to make good on their vows to secure as big a check as possible for their supporters.

In fairness to those who elevate the dividend above all other fiscal priorities, they are faithfully representing their supporters. A substantial minority of Alaskans have tuned out from virtually every policy debate except the one over the PFD’s size, and they have made it clear to candidates that their chief concern is that it be as large as possible, no matter the expense to other programs.

And so, nearly 50 years after the PFD’s original conception, it has become the reverse of what Gov. Hammond intended. Instead of an incentive for Alaskans to keep an eye on government, it has become the only government spending item many Alaskans care about. It has become the biggest stumbling block in the way of passing a sensible budget, both because of legislators’ obsession with its amount and because it is the single largest budget allocation, crowding out funds for other key services. If you’re inclined to doubt that assertion, witness just how quickly the House concurred with the Senate’s budget when the big-PFD hardliners’ my-way-or-the-highway approach crumbled. One can easily see how once savings are gone, the only alternative for funding government would be to dip into the Permanent Fund itself. In short, the annual dividend has become the single most dangerous threat to the Permanent Fund itself, which it was designed to protect.

Maybe it’s too much to hope that legislators take a lesson from the end of this year’s session, but the concurrence vote on the budget — in which mega-PFD dead-enders were left on the wrong side of a vote in which sensible conservatives, moderates and liberals opted to balance dividend demands with other needs — shows that there is a path forward, if lawmakers have the courage to continue down it: We can have a dividend and the services Alaskans expect, so long as legislators exercise restraint and don’t go overboard in either direction. That’s a message Alaskans can understand and support, if their representatives are brave enough to have that conversation with them. If the ultimate budget vote is any indication, we may have seen a majority of legislators in both chambers at last realize that a mega-PFD check isn’t worth what we would have to give up to get it.