Our lawmakers in Juneau are struggling to come up with a sustainable Permanent Fund dividend formula. The reason they’re struggling is there is no such formula. Alaska faces a long-term fiscal gap, and to close it requires ending the PFD.
Since the PFD is not sustainable, Alaska’s only choice in the matter is whether the PFD will have a “soft” ending or a “hard” ending. A “soft” ending would require coordinating the end of the PFD with the beginning of new needs-based social aid programs to protect vulnerable Alaskans. A “hard” ending would be to take no proactive action to protect vulnerable Alaskans before the PFD becomes unfundable.
A proactive soft ending to the PFD requires foresight, funding and will. The long-term fiscal gap became manifest when oil prices crashed in 2008. At that time the state held general fund savings which could have funded a soft PFD ending, but our lawmakers lacked the foresight, spent the savings, and missed the opportunity.
Importantly, the Alaska Supreme Court has ruled that the PFD has no special legal status; it is just another discretionary appropriation funded from the state’s general fund.
The principal argument against ending the PFD is that vulnerable Alaskans rely on it to pay for essential needs. But if the PFD must inevitably end in order to close the state’s long-term fiscal gap, the only way to protect vulnerable Alaskans is to coordinate new needs-based relief programs with the ending of the PFD.
Gov. Mike Dunleavy and others have called for a constitutional amendment to protect the PFD. Fiscally, a constitutionally protected PFD would necessitate state taxes to close the fiscal gap, in effect, making the PFD tax-supported. But again, every state in the nation could fund a tax-supported PFD (clone), but none do because the economics don’t make sense. Even if Alaska were to ignore the economics and implement a tax-supported PFD, the fiscal inefficiency would soon leave the state no choice but to reverse course, revoke the constitutional protection, and end the PFD the “hard” way.
Bottom line: To close Alaska’s long-term fiscal gap requires ending the PFD.
Alaska’s most vulnerable will suffer if the state fails to orchestrate a “soft” PFD ending. To orchestrate a soft PFD ending requires foresight, funding and will. The windfall revenue can provide the funding. Can our lawmakers provide the foresight and will?
— David Knapp
Anchorage
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