by Karl Widerquist | Feb 9, 2015 | News, The Indepentarian
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
by Karl Widerquist | Sep 4, 2014 | News, The Indepentarian
The Permanent Fund Dividend (PFD), Alaska’s small yearly Basic Income, is likely to double this year over last year’s value. The dividend is paid every fall from the returns to the Alaska Permanent Fund (APF), a pool of financial assets accumulated from savings from the state’s oil revenue. The formula for converting returns into dividends is complex. It depends on the average returns over the previous five years and the number of Alaskan residents who apply for it. The exact figure will be released soon, and direct deposits will be delivered by early October.
A BP oil field facility in Prudhoe Bay, Alaska. Photo by BP via Getty Images, via Slate
Mike Burns, the executive director of Alaska Permanent Fund Corporation, was quoted by the Alaska Dispatch saying, “I think the punchline is that the dividend is going to be right about doubling from last year.” The reason for the big increase in the dividend this year has to do with the five-year average used to calculate dividends. The enormous downturn of the 2008-2009 fiscal year have finally dropped out of the calculation. Since then the APF has had a very good run, rising to a total value of $53 billion—an all time record—and its assets returned more than 15% for the 2013-2014 fiscal year.
Last year’s value was $900. So, a doubling would put it the PFD the neighborhood of $1,800 per person or $7,200 for a family of four. The Alaska Dispatch estimates the number will be $1,930.49, “give or take $100.” This would put the dividend near it’s all-time high of $2069, paid in 2008, at the height of the market bubble. Even the record-high amount was far below the livable income that most Basic Income supporters want to see. Yet some of the affects supporters hope to see from a larger dividend are present in Alaska. It has increase economic equality and reduced poverty, and employers have complained that workers are more likely to quit when they receive the dividend.
The APF and PFD are enormously popular in Alaska, but they are not immune to attack. Several years ago the state voted to give the notional dividends that prisoners would have received had they been allowed to apply for the dividend to the prison system. Just this year the state voted to reduce taxes on oil companies, which will ultimately mean less money going into the APF, and therefore, small dividends in the future.
For more information see:
Daniel Gross, “Alaska Is a Petrol State: But it doesn’t act like one.” Slate, August 28, 2014
Alex DeMarban and Sean Doogan, “Estimated at $1,930, Alaska PFD big but no record.” The Alaska Dispatch, August 27, 2014
Dermot Cole, “Permanent Fund principal, not oil royalties, drives most of its growth.” The Alaska Dispatch, August 15, 2014
Trilbe Wynne, “Alaska Permanent Fund tops $50 billion mark, returns 15.5% for year.” Pensions and Investments, August 11, 2014
Associated Press, “Alaska Permanent Fund tops $50B threshold.” Fairbanks News-Miner, August 8, 2014
Sean Doogan, “Size of 2014 PFD checks may double from 2013’s $900.” The Alaska Dispatch, July 30, 2014.
KTVA, “This year’s PFD checks could double the 2013 amount.” KTVA-TV, July 30, 2014
Images_of_Money photo, cc Flickr via the Alaska Dispatch
by Karl Widerquist | Sep 2, 2014 | News
SUMMARY: This article connects its arguments about labor with basic income, concluding, “[I]f the ultimate goal is liberation from poverty, that will only occur when we abandon the delusional quest for full employment for a system where income is separated from work.” Bernard Marszalek, editor of The Right to be Lazy (AK PRESS), can be reached at info@righttobelazy.com . He was a member of a worker cooperative for seventeen years.
Bernard Marszalek, “Laborless Day: Why Labor Day Needs Retooling.” CounterPunch, Weekend Edition August 29-31, 2014
The right to be lazy
by Craig Axford | May 9, 2014 | News
Barbara Jacobson discusses basic income guarantee with World Finance
[Craig Axford]
SUMMARY: In this brief interview Barbara Jacobson, one of the organizers of the European Citizens’ Initiative, explains why a basic income guarantee is good for society as a whole, not just for those struggling to survive on a low income.
World Finance, “Unconditional basic income ‘will be liberating for everyone'”, Youtube, March 24, 2014.
by Craig Axford | Mar 22, 2014 | Research
Image: Bank of Montreal (bmo.com)
[Craig Axford]
A guaranteed annual income targeting the 100,000 citizens of Manitoba that are currently living below the after tax low-income cutoff would cost about $1.2 billion. According to this article, with a willing federal partner the province that was home to the 1970s Minicome experiment could make it happen.
Shaun Loney, “Minimum income can end poverty”, Winnipeg Free Press, March 1, 2014
