by Guest Contributor | Mar 26, 2017 | Opinion
Alaska’s Permanent Fund, Dividend and the central idea that minerals are a shared inheritance have inspired numerous social and political movements across the globe. The Goenchi Mati (“Goan Earth”) Movement in Goa, India, of which I am a part, has drawn from the experiences of Norway and Alaska with their permanent funds.
Our core principles are (a) minerals are owned by the state as a trustee for the people and especially future generations (Public Trust doctrine); (b) minerals are inherited assets and our duty is to ensure that future generations have access to the minerals or their value (Intergenerational Equity principle); (c) mining is essentially a sale of minerals, hence we must ensure zero loss mining – in other words, the full value (the sale value minus all extraction costs and a reasonable profit for the extractor)[1] must be received by the state as trustee; (d) everything received must be saved in the Permanent Fund, which must also be inflation proofed, ensuring the capital is safeguarded; and (e) any real income from the Permanent Fund must only be distributed as a Citizen’s Dividend, a right of ownership over the minerals and the Permanent Fund.
It is not clear if Alaska has received the full value of its oil; whether zero loss mining was achieved. Any loss is a loss to everyone equally. It is simply a per head wealth tax imposed on everyone, with the oil companies making merry. Based on data in India and other parts of the world, we anticipate a majority of the value of the oil has been captured by the oil companies. If this is the case, it is a loss that will be borne by future generations of Alaskans. A close examination is potentially warranted, and additional taxes on oil may be necessary to ensure zero loss mining.
When we sell an inheritance, we must invest everything in a new non-wasting asset of equal value. Traditionally, inheritances are held in precious stones, precious metals or land. These assets retain their value over generations. The Permanent Fund is a recent innovation designed to replicate this function. Inflation proofing is essential in order to ensure that the fund retains the real value of the natural resources in perpetuity. While over 50 such funds exist around the planet, Norway and Alaska are the exemplars.
In contrast, infrastructure is a wasting asset, it depreciates or reduces in value over time. Even investments in health and education perish with the beneficiary. Hence, a diversion of oil money from the Permanent Fund to the budget eventually cheats future generations of their inheritance. Only a fiscal rule of saving 100% of the oil money ensures that the present generation does not cheat their children and all future generations.
Norway, the other exemplar of natural resource management, follows the fiscal rule of saving all money from oil in the Government Pension Fund Global. Norway inflation proofs its fund by regularly estimating the long term after-inflation (real) return on their fund, and capping the distribution below this level based on the 5 year average fund balance.
Imagine taxing everyone equally, rich or poor. It is almost impossible to legislate a per head tax – a tax on existence – in a democracy. It is clearly unfair. Yet, the current proposals in Alaska to divert some of the income of the Permanent Fund to the state budget is equivalent to a per head tax (to the extent of the lost dividend). Put simply, a legislation to tax everyone $1,000 would never pass. Yet, this is exactly equivalent to reducing the dividend by $1,000 and paying that amount to the budget.
Alaska’s current budget troubles stem from a central misconception of the nature of oil money. Government accounting treats it as “windfall revenue”. Yet, it is obviously the sale of the family gold. Jay Hammond’s first experience with natural resources was with salmon runs in Alaska’s Bristol Bay. As long as salmon runs are managed sustainably, the money is revenue, equivalent to the fruit of the natural resource.
Mining is unsustainable. Every barrel of oil extracted is one less in the ground. While Jay Hammond managed to see through the deceptive government accounting, his initial proposal to save 50% of the oil money did not go far enough. Eventually, only 25% of the oil money was saved, and 75% treated as revenue in the Alaska budget.
The impact is obvious. Alaska’s budget soared from $3 bn in 2005 to $8 bn in 2013 on the back of the China boom. Expenditures followed. The crash has thrown the budget into turmoil. However, if Alaska had treated all the oil money as a sale of the family gold and saved it, the ballooning of the budget wouldn’t have occurred.
It is a difficult time to consider saving all the oil money into the Permanent Fund, and only paying out a dividend without any diversion to the budget. Yet, it is the only ethical course of action. Any legislative proposal worth examining must mandate that this comes to pass within a limited time frame. Otherwise, Alaska will continue to suffer from budget volatility due to oil price fluctuations, and this issue will recur.
Alaska’s Permanent Fund Dividend is the largest example of a Citizen’s Dividend as well as Universal Basic Income in the world. A central idea of the Goenchi Mati principles is that the Citizen’s Dividend creates the link, financial and emotional, between the individual, their shared inheritance and their moral obligations to future generations. The expectation is individuals safeguarding their dividend would by extension safeguard the Permanent Fund and the overall mineral value. The current Alaska budget crisis is a second test of this seminal idea of Jay Hammond.
The world watches with bated breath. Will Alaskans come out in large numbers to protect their children and future generations? Will individual interest and morality triumph as Jay Hammond predicted? Or will another beacon of what is fair, just and right in this world succumb?
About the author:
Rahul Basu is a member of the Goenchi Mati Movement, which advocates fair mining in the state of Goa.
[1] This is the Economic Rent
by Kate McFarland | Jan 9, 2017 | News
A newly launched grassroots campaign is using social media and video to protest recent cuts to the state’s annual dividend.
As reported in previous Basic Income News stories, Alaska Governor Bill Walker vetoed half of the Legislature’s allocations to the 2016 Permanent Fund Dividend (PFD). Often regarded as one of the best examples of “real-world basic income,” the annual PFD provides all Alaskan adults and children with checks of an equal amount, funded by earnings on a permanent fund in which a portion of the state’s oil revenues are invested.
The amount of the PFD reached its peak of $2,072 in 2015. In 2016, it dropped to $1,022 — though it would have been $2,052 absent Walker’s veto.
Although intended to help preserve the PFD during a significant budget crisis, Walker’s action unsurprisingly generated much controversy. State senator Bill Wielechowski filed a lawsuit charging that Walker’s veto was unconstitutional. The suit was dismissed by a superior court judge in November, but Wielechowski has appealed the decision to the Alaska Supreme Court.
With the Supreme Court hearing likely not to take place until April or May, a group of 12 lawmakers and activists have launched the nonpartisan grassroots group Permanent Fund Defenders, which advocates for the restoration of the full amount of the PFD. The group currently operates primarily through social media, and has created animated videos describing the history of the PFD (see below).
On its Facebook page, the Permanent Fund Defenders demonstrate solidarity with the Goenchi Mati Movement in the Indian state of Goa (previously profiled in Basic Income News), which promotes the establishment of a permanent fund and citizen’s dividend based on money from the sale of minerals.
More information:
Liz Raines, “Former lawmakers, political activists launch group to block PFD restructure,” KTVA, January 3, 2017.
Previous Basic Income News reports on the recent PFD controversy:
Kate McFarland (September 22, 2016) “ALASKA, US: Senator files suit against Governor’s veto of half of Permanent Fund Dividend”
Kate McFarland (September 29, 2016) “ALASKA, US: Amount of 2016 Permanent Fund Dividend to be $1022”
Kate McFarland (December 3, 2016) “ALASKA, US: Judge Upholds Governor’s Veto of Part of State’s Social Dividend”
Reviewed by Genevieve Shanahan
Photo: Shell Oil drilling rig, CC BY 2.0 Day Donaldson
by Kate McFarland | Dec 3, 2016 | News
A superior court judge has upheld the Governor of Alaska’s decision to halve the amount of the state’s annual social dividend payment in 2016.
Senator Bill Wielechowski
CC BY-SA 4.0 Peter Stein
As previously reported in Basic Income News, Alaskan senator Bill Wielechowski filed a lawsuit in which he contested Governor Bill Walker’s veto of about half of the funding that the state legislature had allocated to the state’s Permanent Fund Dividend (PFD) and asked the courts to require that the Permanent Fund Corporation transfer the full amount originally allocated to the PFD.
Walker vetoed the funds in June 2016, in the face of a mounting budget crisis in the state, and Wielechowski filed his suit in September. On November 17, Superior Court Judge William Morse dismissed the case.
The Alaska Permanent Fund was established in 1976 by an amendment to the Alaska State Constitution that mandated that at least 25% of the money earned from the state’s oil be placed into a permanent fund, enabling the state to share its profits from non-renewable resources with future generations of Alaskans. In 1980, the Permanent Fund Corporation was created to manage the fund. Financed from the investment earnings on the permanent fund, the PFD is a cash payment distributed annually to all permanent residents (including children). The PFD is well-known in basic income circles as a “real world” example of a basic income–a universal and unconditional cash transfer to individuals. The PFD reached its peak amount of $2,072 in 2015, and it would have stood at $2,052 in 2016 had Walker not vetoed the legislature’s budget. Instead, this year’s PFD is $1,022 per Alaskan resident.
In previous years, the transfer of money from Permanent Fund Corporation to the fund for the dividend has been routine and uncontested.
In his suit, Wielechowski charged that Walker violated a law (Alaska Statute 37.13.145) that states that the Permanent Fund Corporation “shall” transfer half of its available income to the fund for the PFD. On Wielechowski’s interpretation, this statute implies that the transfer of funds is “automatic” and thus not subject to veto by the governor.
Morse argued, however, that the amendment setting up the Permanent Fund did not specify that it would affect the governor’s power of veto, saying to Wielechowski, “You’re telling me that what they secretly were trying to do was eliminate the governor’s veto authority, but they never mentioned that?”
Wielechowski has said that he will appeal the decision to the Alaska Supreme Court.
References
Alaska Dispatch News (November 17, 2016) “Judge tosses lawsuit challenging Alaska Gov. Walker’s PFD veto” Alaska Dispatch News.
Andrew Kitchenman (November 17, 2016) “Judge upholds Walker’s veto halving Permanent Fund dividends” KTOO Public Media.
Alaska pipeline photo CC BY 2.0 Maureen
by Dave Clegg | Nov 16, 2016 | Opinion
The London-based Apolitical website’s article on basic income (BI) opens with “Money for nothing – it sounds like a utopia” and then looks at some examples of BI concepts that have already been applied around the world.
This phrase, “money for nothing” represents a commonly held bias that, when there is no commodity returned for the money, whether that commodity is a thing or someone’s labour, then there is no tangible value returned for the monies. This bias is widely held and promoted by many adherents of modern-day economic theories – a bias which too often dismisses, or simply ignores, the numerous personal and societal benefits that others have evaluated and documented as attributable to BI models.
The article does a fairly good job of maintaining its organizational claim of being “apolitical” in that it does not overtly favour any particular side in the issue. Yet that does not mean it has escaped the narrow-minded focus that so many politicians, their handlers, and media commentators alike have grudgingly adopted regarding the BI. In fact, the Apolitical article offers a wonderful example of the very limited ways in which the BI idea is being appraised, namely as simply a response to job automation and/or carrot-and-stick welfare programmes.
Apolitical does, occasionally make mention of the fundamental roots of a BI, roots that run far deeper than simply jobs and poverty. Yet to emphasize that a BI is simply about addressing poverty or unemployment is to overlook the very foundation of a BI – namely that such a policy is meant to be an expansion upon, and commitment to, something that should never be commodified, namely personal freedom. All other aspects of a BI flow from this fundamental premise. That is, if a nation and its people are sincerely committed to the idea of freedom itself.
The five points made by Apolitical in the above article are all legitimate and commonly discussed around the world. Yet the shallowness of these points is intricately tied to the same old penny-pinching issues that surround welfare, as well as the easy access to cheap human labour that employers have enjoyed for far too long.
Yes, a BI can help eliminate the stigma and overbearing bureaucracy associated with welfare programmes. It would also force employers to be truly competitive regarding employee wages and hours. However, the most valuable asset each and every person possesses is our time in this life. We should be the stewards of that time – not employers and not bureaucrats. It is the personal freedom provided by a BI that is truly important to everyone, not just the workforce and welfare recipients.
A BI would allow individuals to tend to family and personal concerns without the anxiety of how to survive without a “job” income during these times of personal need. For example, if a family member severely injured as the result of a car accident. The family of this person may be too young for jobs, or on very low income as they had been relying upon the injured family member for income and cannot afford a carer to help in these times. In this case, a BI would help tremendously. Some might say that they can seek a uber accident attorney Glendale or a personal injury lawyer in order to seek compensation and financial security. Indeed these cases can bring great compensation, but court cases can take time, what will the family do in the meantime? Again, a BI would allow individuals to tend to family and personal concerns should anything happen. There may be no greater freedom than to have the time and economic stability necessary to order our lives as we, ourselves, see fit, rather than as employers demand, as is becoming far too common these days.
Politicians are slowly coming to accept that individuals are the best stewards of their monies, not bean-counting governments who tend to value the beans over the people the beans are intended for.
Let us examine each of Apolitical’s five points to see how personal freedom is addressed here.
1. Governments are not thinking the same as tech optimists
Apolitical is right about this and politicians are notoriously slow to respond to social changes of any kind, never mind one of this magnitude. Yes, the tech optimists foresee an evolutionary step in human time management when robotics and automation take over the monotony and the drudgery of the repetitive and injury-prone tasks found in so many labour-intensive “jobs”. Of course, these robotic inventions will not come soon enough to stop so many of our hardworking population from getting injured. In the meantime, if you’ve been injured at work, you will likely be entitled to personal injury compensation. Hopefully, the workforce of tomorrow will mean fewer people will have to take legal action in the future. If at all an employee needs to take some legal action but do not know where to head out for the same, check for firms similar to Douglas Beam, P.A. We should create a new workforce that is far more reliable (never taking time off), disposable (without regrets or complaints), and economically more efficient than human beings.
From the technologist’s viewpoint, a BI becomes an essential aspect of employment and personal advancement because of the accelerating pace of technological advancement. Every new innovation requires that the humans who will be utilizing those innovations undergo time-consuming training and up-skilling. These advances can even lead to whole new careers for which a BI would be the springboard to pursue those educational and up-skilling goals. To tech experts, this is not “money for nothing” but instead an investment in the future of the nation, its economic infrastructure, its people and its economy.
But there is also a very real need to understand how a BI frees workers – especially those who only have labour, rather than any marketable skills or training, to sell – from the spectre of destitution and homelessness if they are unable to find work, or simply to feed and/or shelter themselves on the meager, subsistence wages offered today to unskilled labourers.
Of course, time management in this case refers only to the workplace. What is overlooked here is the personal freedom that a BI introduces into the optimist’s time management scheme. A BI would provide an individual with the economic freedom to then choose to acquire more skills or education, or to spend more time with family, or to take a much-needed break. This freedom is of great value to the individual, as well as their future prospects, but has little or no meaning to many economists.
Apolitical, however, does make a very good point about welfare reform. It is true that eradicating the expensive and needlessly patronizing welfare bureaucracies would entail huge cash savings for governments at national, provincial/state and municipal levels everywhere – savings that could be utilized far more efficiently and effectively when incorporated into a BI.
2. People already get money for nothing
Actually people get money from their government because they are deemed, by their government, to be in need and it is a government’s principal responsibility to succor to its citizens in times of need. While Apolitical talks about how “money for nothing already exists in the state pension” system, it ignores a number of other social safety net programmes such as health care, welfare, student loans, disability, make-work projects, employee subsidies, food banks, and shelters, to name a just a few of the most common.
Social safety net programmes always incur infrastructure and staffing costs associated with the policing and distribution of these monies. A BI removes the stigma associated with so many of these programmes via its universality but it cannot ignore the special needs associated with people such as the disabled, seniors, and the unemployed. Their special circumstances can easily entail more than simply a “free money” infusion involving things such as in home support, accessibility of public buildings, mobility aids, wheelchair-friendly streets and curbs, and emotional and mental supports to deal with chronic and acute complications, to name just a few.
Apolitical also mentions the Alaska Fund, a decades old statewide “free money” programme that, today, is surrounded by much controversy, with some demanding the money be used, instead, to fund state social programmes while others are happy for the money to be put directly into the hands of the people themselves.
This is a very good example of how the assets of a community – its resources, both natural and human – are the heart and soul of its economy. However, the Alaska Fund’s greatest feature is that it offers good, sound support for the premise that some of the wealth flowing from a community’s resources should be returned to the people that comprise the community.
The debate here is not whether “free money” should be distributed to the citizenry, but rather how much and in what manner.
3. The schemes in the developing world aren’t really analogous
Apolitical is absolutely right to point out that the drastically modified BI programmes implemented in Namibia, India, and Brazil cannot be directly applied in more developed areas. These programmes are largely a response to severe destitution and poverty in those countries, while here in North America the BI is framed as a response to automation and welfare inequities.
However, Apolitical does recognize that there is a self-empowerment and entrepreneurial spirit that blossoms within the poorest individuals in the above-mentioned countries once they have been freed to make their own choices of how best to utilize their time and abilities to address their own needs and interests.
These observations correlate well with Canada’s own Dauphin Manitoba Mincome BI programme, which ran for five years. Mincome was well monitored and documented at a variety of levels and interests. Documentation that highlighted the many personal advantages derived from a BI. These advantages included the reduction of both individual and family stress levels, greater ability to cope with family issues and, most importantly, noticeable improvements in children’s health and growth due to better nutrition which lead to higher learning evaluations. While some people did indeed leave the workforce, they did so to upgrade their education and skills, to attend to personal and family issues, or simply to take a much needed break.
All of these findings amount to huge social and personal savings that invariably strengthen and improve communities, yet, once again, they are not benefits that economists are able to quantify or put a monetary value on and are too often deemed to be without value.
4. It actually all comes down to incentives
Here Apolitical addresses the commonly held fear that a BI would act as a disincentive to “working,” as if “paid employment” should be every person’s preoccupation rather than the management of their lives. However, Apolitical cites Hugh Segal, a Canadian senator who has been a long-time advocate for BI programmes and who laments the very real disincentives to improving one’s life that have been built into Canada’s social programmes. This is why Senator Segal has long applauded the personal empowerment that a BI could provide to all Canadians.
It is here that Apolitical acknowledges Sam Altman of Y Combinator – a US private investment firm – who sees a BI as the seed money necessary to provide the personal freedom allowing individuals to be economically empowered to address the rapidly changing education and training demands of a technologically driven economy. Of course, Altman seems far more interested in employing a BI to address the demands of technology and its impact upon production and the workforce than in actually addressing personal freedom per se.
Apolitical is absolutely right to acknowledge that BI differs from existing, welfare-style social programmes and highlights the divide as between those who insist upon “incentives” used coercively to promote job seeking and those who support the “freedom to choose” as incentive enough for anyone.
5. It’s not utopia or bust
Apolitical wisely concludes that, if supporters of a BI succeed, “…they will establish the principle that you can simply give people money and trust them to use it in a way beneficial to themselves and, indirectly, to society.” This is a sentiment long-shared by those who advocate for BI and wonderfully demonstrates that this sentiment is central to personal freedom and the creation of an empowered population. For Apolitical and the rest of us only time will tell.
by Kate McFarland | Oct 9, 2016 | News
At a press conference on Wednesday, October 5, Alaska state senator Mike Dunleavy (Republican) announced plans to introduce legislation to restore the 2016 Permanent Fund Dividend (PFD) amount to $2052, the full amount calculated by the Alaska Permanent Fund Corporation. Earlier in the year, Governor Bill Walker vetoed over half of the state legislature’s appropriation of funds to the PFD, resulting in an amount of $1022 per Alaska resident.
Alaskan residents have joined in protest of the cuts in the PFD. More than 15,000 individuals have joined the Facebook group “Alaskans Against Gov. Walker’s PFD Theft”, which organized a protest at an Anchorage budget forum held on Saturday, October 1.
Meanwhile, a lawsuit by Democratic state senator Bill Wielechowski — which charges that Walker’s veto was illegal — is awaiting resolution. In response to a request for an expedited review, arguments have been set for November 17 in Anchorage.
As a universal and unconditional cash transfer, paid annually to all residents of Alaska, the PFD is frequently cited as an example of a “real world” universal basic income. It continues to be presented as a model for UBI policies by groups ranging from the Movement for Black Lives in the United States to the Goenchi Mati Movement in the Indian state of Goa.
References and further information:
Nathaniel Herz (October 6, 2016) “Alaska lawmaker stokes Permanent Fund fight with push to add $1,000 to dividends” Alaska Dispatch News.
Paula Dobbyn (October 5, 2016) “State senator prepares bill to restore full amount of 2016 Permanent Fund dividend” KTUU.
Travis Khachatoorian (September 30, 2016) “With reduced PFDs on the way, protests expected at budget forum” KTUU.
Reviewed by Genevieve Shanahan
Photo: Juneau Morning, CC BY-NC 2.0 Dale Musselman
