Alaska’s fishermen are going to be financially hurt as a result of the Coronavirus. Restaurant workers are being furloughed. Tourism companies are suspending operations. Cruise liners are parked. Some suggest the solution for Alaskans is to cut the Permanent Fund Dividend to zero.
The Alaska Permanent Fund is not the Legislature’s money nor the Governor’s money. It’s the people’s Fund, a financial stabilizer, managed for you, the beneficiaries. The Fund was mandated to invest 25% of the royalties when established by Constitutional Amendment as a dedicated Fund. The other 75% of royalties plus all the taxes and tariffs and other numerous ways to grab money from the oil patch were retained for Legislative purposes. Now Legislators and others want your 25% of royalties plus the entire earnings of the Fund. Legislators tell us that we’re lucky to get whatever is left, after their spending.
The Permanent Fund long term yields have been good and can lead to prosperous Alaskans. With dividends, we have a direct individual benefit for developing our natural resources, just as Governor Hammond intended. The PFD diversifies Alaskans’ income stream adding investment income from the Fund for education, retirement and making affordable the higher cost of living in Alaska.
A waitress with a husband and two kids earns $12,000 in dividends this year under existing law. That $12,000 can pay rents or mortgages due during the layoffs. Just change the payout date from October to April. Fishermen and tour operators, indeed all Alaskans who will be hurt by the Coronavirus Pandemic can get by if their full Permanent Fund Dividends are paid. That’s good planning by our forefathers.
Governor Hammond would be well pleased that when the Fund is left alone, it provides substantial direct benefits to Alaskans. Greater security, more affordable education and cash reserves for emergencies like the virus are all benefits of abiding by the original calculation of the dividend. Make no mistake, we already have the earnings – in cash. Anyone who tells you we don’t, can’t read the Comprehensive Annual Financial Report of the State of Alaska.
Our problem is our Legislators passed two conflicting statutes, both on the books for calculation of the dividend. The first one is our historic 50/50 split. Earnings are evenly divided between the People’s Dividend and General Fund appropriated by the Legislature. But, the Legislature enacted a per cent of market value approach, POMV that reduces the amount that can be drawn and shockingly, removed the calculation for earnings. The Legislature, for three years, has divided the earnings with bloated government as the winner and the people getting the short end of the stick.
The solution to our fisherman’s cash flow is not to further cut the family’s cash. The same is true of tourism employees, retailers, restauranteurs, and other Alaskans who are experiencing financial turmoil as a result of the virus. Our cash cow has had great earnings. The Legislature simply wants to butcher it – and use all the money to grow more government. Alaskans have had enough and don’t want their PFD reduced or ended.
An alternative way back to fiscal sanity is to stop the Legislature from dedicating funds. The Alaska Constitution bans dedicated funds except for federally provided revenue and those Funds in existence when we became a state. Or, as the Permanent Fund was established, with passage of a Constitutional Amendment by the people.
One unconstitutional dedicated fund is the Power Cost Equalization Fund at $1.2 billion, housed in the Alaska Energy Authority. AEA financial statements describe the PCE assets as restricted and not available for government spending. That’s a dedicated fund. There are many in state government.
The Supreme Court ruled that PF dividends must compete with all other appropriations. But, the Legislature unconstitutionally protects the PCE. PCE doesn’t compete for appropriations but your PFD does. Special interests are pleased.
The Permanent Fund must return to averaging our five year earnings to calculate the dividend. The market turmoil of today then becomes a blip on the screen of our long term investment program. Yes, stocks and oil go up and down. That’s why we insisted on the five year earnings average. A down year is not the end of life.
Most Alaskans are off work awaiting clearance to return. We have time to communicate directions to our Legislators. My message to my Senator, Natasha Von Imhof and my Representative Chuck Kopp is simple. Rescue our economy from the damage of Coronavirus by voting to pay a full dividend. Please change the date to April 30, 2020.
If you fail in this effort, I will vote against you. I will not vote for Legislators who damage the people who elected them. Alaskans, if you agree, please share the instruction with your Legislators. After all, they work for you.
Doctors will solve this Coronavirus and in time, we will be stronger as a result. Doctors take a Hippocratic Oath, paraphrased as “First, do no harm”. Legislators should take that oath for our Permanent Fund dividend.
Jim Crawford is a third generation Alaskan entrepreneur who resides in Anchorage with his bride of 36 years, Terri. Jim is President of The Alaska Institute for Growth, a local think tank which studies and reports on and may sponsor projects of sustained economic growth for the Alaskan economy. Mr. Crawford was a member of the Investment Advisory Committee, appointed by Governor Hammond to plan and implement the Alaska Permanent Fund Corporation.
