by Karl Widerquist | Oct 16, 2015 | News, The Indepentarian
Alaska’s small basic income, the Permanent Fund Dividend (PFD), is coming under increasing political attacks as the state’s fiscal crisis grows. the dividend, in place since 1982, has been incredibly popular, but the double-hit of declining oil prices and declining oil production have created a fiscal crisis that has forced the state to look for new revenues. As Basic Income News has reported recently, both legislators and the Alaska public have shown an increased willingness to divert Permanent Fund earnings from the dividend to the state general budget.
As this year’s record-setting dividend checks of $2072 were being distributed, several editorials argued for reducing or eliminating the dividend and using that money to fill the state’s budget gap.
Craig Johnson, Chairman of the State House Rules Committee, recently spoke in defense of the fund, but went so far as to say only that touching the Permanent Fund should be a “last resort” that he does not support, “right now.”
Paul Jenkens, Tim Hale, and Mike Navarre have all written in favor of diverting funds from the dividend, and the Ketchikan Borough Assembly is considering a resolution urging the state to divert funds.
Some of the arguments are as simple as this statement from Tim Hale, “To me, it comes down to one thing: I’d rather lose my dividend than pay taxes.”
Hale’s attitude is very much the opposite to that of the founder of the dividend, the late Governor Jay Hammond, who believe that a dividend was far more important than a tax reduction. The dividend ensures that all Alaskans, rich and poor, share in the wealth of the state. Only people with substantial incomes benefit very much from lower taxes, and how much they benefit depends on the size of their income.
For more information, see the following articles:
Paul Jenkins, “Don’t tax Alaskans until state cuts to the bone and adopts endowment model for Permanent Fund.” Alaska Dispatch News, September 26, 2015
Tim Hale, “Use Permanent Fund earnings to pay for services – and cap dividend at zero.” Alaska Dispatch News, September 30, 2015
Mayor Mike Navarre, “Permanent Fund earnings can help keep state afloat. “ Fairbanks Daily Newsminer, September 27, 2015
Alaska Business News, “Johnson Touts Benefits of Dividends to Local Economy and Vows to Protect PFD.” Alaska Business News, October 2, 2015
Mary Kauffman, “Ketchikan Borough Assembly Considers Urging State to Include Permanent Fund in Fiscal Plan” Sitnews, October 03, 2015
by Stanislas Jourdan | Sep 23, 2015 | News
Despite the large amount of the annual dividend for 2015, the future of Alaska’s small basic income is under political threats as the state suffers from a large deficit gap.
Confirming earlier forecasts, the amount of Alaska’s citizens’ dividend paid this year will be the highest ever paid (without inflation) since the first payment made in 1982.
Yet, perspectives for what is the closest policy to a universal basic income in the world today are not so shining. Because the Alaskan government is currently trying to cope with an historical budget deficit, various suggestions have been made on how to reduce the state’s deficit, some involving changes in the dividend mechanism, to make it less generous.
The citizens’ dividend is administered by the Alaska Permanent Fund Corporation which was established in 1976 by constitutional amendment.
The fund collects at least 25 percent of all the state’s mineral royalties and lease payments and invests its accumulated reserves in financial markets. The financial earnings are then distributed equally among all Alaskans as a citizens’ dividend.
The amount of the dividend however is based on a five-year rolling average of the financial earnings of the fund, which therefore no longer includes the recession years post-crisis. For this reason, low oil prices have plunged Alaska into a crippling budget deficit, but it hasn’t yet affected the size of the payout.
Thus, more than 644,000 Alaskan residents registered or born before December 31st 2014 will receive their dividend checks beginning on October 1st.
Political Threats on the Future of the Dividend
Despite what seems to be good news, Alaska is now in a paradoxical situation where the earnings from the Permanent Fund have exceeded the earnings from Alaska oil. This paradox has recently provoked a wave of attacks against the dividend, including from Alaska’s current governor, Bill Walker (Republican).
For the ceremonial announcement of the amount of the annual dividend, Walker deliberately chose to let a 12-year-old girl named Shania make the public announcement in order to send a signal that, according to him, the future of Alaska’s children are endangered by the unsustainability of the Fund.
https://vimeo.com/139986120
“We are paying out more in PFD checks than we are for the education of young Alaskans like Shania—at a time when we are struggling with a $3.5 billion deficit,” the Governor stressed in a statement to the press. “Alaskans need to know this is unsustainable. I’m confident Alaskans will pull together to find a solution, as we always do when times are tough.”
“It is time to have an open and honest conversation about our finances, and how resources like the Permanent Fund can be used as an asset. The vision of the Permanent Fund was to turn a nonrenewable resource into a renewable one, and it is our job to determine how to best use and protect that gift for the benefit of all Alaskans.”
A message that was also stressed by Lt. Governor Mallott (D), and Eric Wohlforth, both former members of the Fund’s Board of Trustees, in advance of upcoming debates on how to reform the Fund.
“The original purpose of the Permanent Fund was to save wealth for future generations of Alaskans. This is the people’s fund. In the months before the legislative session, groups will meet to talk about how we should manage our wealth. I urge all Alaskans to become informed investors, for their sake and for the sake of the next generation.” Eric Wohlforth said, thus making the threats against the Fund more precise than ever.
by Karl Widerquist | Aug 31, 2015 | News, The Indepentarian
Alaska Dispatch News has released its estimate of Alaska’s Permanent Fund Dividend (PDF) for this year. The Alaska Dividend is the closest policy to a basic income in the world today. It has paid dividends to all Alaska residents since 1982. According to reporter Sean Doogan, the dividend is likely to be about $2,100. If so, the dividend would be technically the largest in the state’s history. The next largest amount ever paid as “the Permanent Fund Dividend” was slightly smaller, $2,069, in 2008. In that year, however, the state added $1,200 to each check as a rebate from the state’s budget surplus, making the total amount each resident received $3,269, considerably higher than any likely amount this year.
The Alaska Dividend amounts 1982-2014
The amount is large this year because the investment fund on which it is based is doing well. The amount paid each year depends on how many Alaskans apply and on a five-year average of returns to the fund. The fund has been making strong returns in recent years. It has recently reached a total value of $52.8 billion. Although the fund was created out of out revenues and is supplemented by them each year, the value of the fund and dividend is not dependent on current oil revenues, which have been declining sharply from both lower prices and fewer exports.
Sean Doogan, “Our estimate of this year’s PFD check: $2,100.” Alaska Dispatch News, August 22, 2015
Catie Quinn, “Permanent Fund Adds 4.9%.” KSRM Radio Group, August 20, 2015.
APFC, “The Permanent Fund Dividend.” The Alaska Permanent Fund Corporation website.
Credit pciture: CC Teddy Llovet
by Karl Widerquist | Aug 6, 2015 | News, The Indepentarian
Alaska’s Permanent Fund Dividend (PFD)–the closest policy to Basic Income existing in the world today–could reach over $2000 this year, but it remains under threat as Alaskan politicians seek ways to close the budget deficit.
According to KTUU TV, Bill Popp, the head of the Anchorage Economic Development Corporation predicted that this year’s PFD will reach $2,000. The PFD varies each year because it is financed by an investment fund owned by the state. It is paid each year to every Alaskan U.S. citizen who fills out a form verifying their residency in the state. Last year the PDF was $1884. A payout of $2000 would be close to the record high dividend of $2,069.00 of 2008. It will still be far below 2008’s full payment, which included a $1200 supplement from the state’s budget surplus that year.
Alaska’s Dividend is so popular that recent editorials have suggested linking the PFD application to voter registration to encourage more people to vote. However, it is under attack because declining oil exports coupled with declining oil prices have created a large budget deficit. This budget pressure does not directly affect the PFD because it is financed by its own dedicated investment fund of more than $50 billion. However, politicians have increasingly been talking about redirect money from that fund to the regular state budget to help close the deficit. One recent editorial suggests capping the dividend at $1000 and using the rest of the money for the regular state budget.
For more information see:
Kortnie Horazdovsky, “2015 Permanent Fund Dividend could hit $2000, AEDC says,” KTUU-TV, Jul 29, 2015
Dermot Cole, “Linking voter registration to PFD would create fundamental change.” Alaska Dispatch News, August 2, 2015
Elise Patkotak, “How about this? If you don’t vote, you don’t get a PFD.” Alaska Dispatch News, July 28, 2015.Brian O’Connor, “Sustainable Alaska: Tax package likely necessary to plug $2.7b budget hole.” The Mat-Su Valley Frontiersman, August 1, 2015.
Picture credit CC Attribution-NonCommercial 2.0 Generic (CC BY-NC 2.0) Timothy Wildey
by Karl Widerquist | Jul 22, 2015 | News, Opinion, The Indepentarian
Alaska’s small Basic Income, “the Permanent Fund Dividend” (PFD), has recently come under greater political pressure than — perhaps — ever before.
The PFD is a yearly dividend paid out of an investment portfolio, “the Alaska Permanent Fund” (APF), which is financed by accumulated savings from the state’s oil revenue. The fund has a principal of more than $50 billion, and it paid out a dividend of $1884 to each Alaskan in 2014. The dividend is fully funded by the APF. On its own it is financially sound. Barring a major catastrophe, as long as politicians leave the APF alone, it can continue to fund the dividend long after we are all dead.
Politicians will leave the APF alone, or so most Alaskans thought until recently. The PFD has been so popular that it was known as the “third rail of Alaskan politics,” meaning that any politician who touched it died. But political realities might be changing.
Since 1980 the Alaska state budget has been funded almost entirely by oil revenue. Now with both declining oil prices and declining oil production, the state faces a large budget shortfall. Lawmakers eventually agreed to close the deficit without tapping into the APF and PFD by cutting spending and taping into another state savings fund, but several lawmakers, including the state’s governor, Bill Walker, proposed tapping into APF earnings. The phrase “third rail of Alaskan politics” barely made the conversation.
Cuts to the PFD could be coming in the next few years. Discussing the future of the budget, Governor Walker said, “At this point I don’t see a scenario that doesn’t involve some of the earnings from the permanent fund.”
