News; News & Events

Drop in Oil Prices Causes Concern for the Future of Alaska’s Small Basic Income

The recent drop in oil prices has had a devastating effect on the Alaska state government’s budget, most of which is derived directly or indirectly from current oil revenues. Alaska’s Permanent Fund Dividend (or PFD—Alaska’s small basic income) is not financed by current oil revenue and so is technically unaffected by fluctuating oil prices, but budgetary pressure from declining oil revenues could cause political pressure to divert revenue from the PFD into the main budget.

The PFD is financed by the Alaska Permanent Fund (APF), a sovereign wealth fund set up in 1976 to make some of Alaska’s oil windfall permanent. The APF is protected by the state’s constitution: the state can spend only the returns to the fund, not the principle. But the PFD does not have similar projection. It was created by an act of the state legislature in 1982, and even with 33 years of precedent, it is vulnerable to legislative decision. The PFD is so popular that it has been called “the Third Rail of Alaskan Politics,” meaning that any legislator who touches it dies. But budgetary pressure could change that political condition.

The recent decline in oil prices on top of a large tax cut the state government gave to the oil companies a few years ago has led to a very large budget deficit—currently projected at about $3.5 billion. Legislators are discussing how to fill the deficit. Some legislators have promised not to divert money slated for the PFD, but some recent editorials have called to divert money from the PDF to the general budget.

May different solutions are being discussed. One legislator has introduced a bill to amend the state’s constitution to permanently protect the PFD. A recent editorial calls for reversing the tax cut for the oil companies. One plan being proposed is to divert all new oil revenues to the APF, then use half of the returns from the APF for the PFD and the other for general revenue. Another plan calls for reintroducing the state’s income tax; the state has been without an income tax for as long as it has had the PFD. The absence of an income tax has been nearly as popular as the PFD. It remains to be seen whether support for the PFD will remain strong in the face of the prospect of reviving the income tax.


Picture credit: CC Ryan McFarland

For more information, see the following articles:

Alex DeMarban, “Alaska Dispatch, Panelists suggest cuts, tapping Permanent Fund earnings to solve Alaska’s fiscal woes.” Alaska Dispatch News, October 5, 2014

Becky Bohrer, “Permanent Fund Dividend eyed for constitutional protection.” Valdez Star, Vol. 27 Edition 2, January 14, 2015

Becky Bohrer, “Lawmaker’s bill aims to guard Alaska Permanent Fund benefit.Alaska Dispatch News, January 9, 2015

Carey Restino, “It’s time to file for Permanent Fund Dividends, and contemplate changes.The Bristol Bay Times, January 30th, 2015

Fairbanks Daily News-Miner Editorial Board, “Alaska needs budget leadership: Bold solutions needed to fill revenue hole left by low oil prices.Fairbanks Daily News-Miner, December 14, 2014

John Havelock, “Alaskans should be willing to pay their share with an income tax.Alaska Dispatch News, January 26, 2015

Katie Moritz, “Senators: Everything but taxes, PFD on table to fix budget.Juneau Empire, January 21, 2015

KTVA “Walker administration tries to rein in Alaska’s budget.” KTVA CBS 11 News, December 16, 2014

Merrick Peirce, “Writing on the wall: time to dump SB 21.” Fairbanks Daily News-Miner community perspective, January 11, 2015

Ray Metcalfe, “A formula for securing Alaska’s financial future.Alaska Dispatch News, January 28, 2015

About Karl Widerquist

Karl Widerquist has written 949 articles.

Karl Widerquist is an Associate Professor of political philosophy at SFS-Qatar, Georgetown University, specializing in distributive justice—the ethics of who has what. Much of his work involves Universal Basic Income (UBI). He is a co-founder of the U.S. Basic Income Guarantee Network (USBIG). He served as co-chair of the Basic Income Earth Network (BIEN) for 7 years, and now serves as vice-chair. He was the Editor of the USBIG NewsFlash for 15 years and of the BIEN NewsFlash for 4 years. He is a cofounder of BIEN’s news website, Basic Income News, the main source of just-the-facts reporting on UBI worldwide. He is a cofounder and editor of the journal Basic Income Studies, the only academic journal devoted to research on UBI. Widerquist has published several books and many articles on UBI both in academic journals and in the popular media. He has appeared on or been quoted by many major media outlets, such as NPR’s On Point, NPR’s Marketplace, PRI’s the World, CNBC, Al-Jazeera, 538, Vice, Dissent, the New York Times, Forbes, the Financial Times, and the Atlantic Monthly, which called him “a leader of the worldwide basic income movement.” Widerquist holds two doctorates—one in Political Theory form Oxford University (2006) and one in Economics from the City University of New York (1996). He has published seven books, including Prehistoric Myths in Modern Political Philosophy (Edinburgh University Press 2017, coauthored by Grant S. McCall) and Independence, Propertylessness, and Basic Income: A Theory of Freedom as the Power to Say No (Palgrave Macmillan 2013). He has published more than a twenty scholarly articles and book chapters. Most Karl Widerquist’s writing is available on his “Selected Works” website (works.bepress.com/widerquist/). More information about him is available on his BIEN profile and on Wikipedia. He writes the blog "the Indepentarian" for Basic Income News.

The views expressed in this Op-Ed piece are solely those of the author and do not necessarily represent the view of Basic Income News or BIEN. BIEN and Basic Income News do not endorse any particular policy, but Basic Income News welcomes discussion from all points of view in its Op-Ed section.

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