Community Perspective

The most common PFD misconceptions

Editor’s note: This column is the second in a continuing series by the author about the Alaska Permanent Fund dividend and the state’s fiscal system.

 

1. Was the Alaska Permanent Fund created to pay permanent fund dividends?

No. The permanent fund was created to save a portion of the oil wealth coming to the state of Alaska following the discovery of the supergiant Prudhoe Bay oilfield. There was no agreement about what exactly the amount saved would be used for in the future when the permanent fund was created in 1976 by an amendment to the Alaska Constitution, a process that requires approval by the voters. A review of the record shows that everything from dams to day care centers to dividends were dangled as possible future uses of the savings to entice the people of Alaska to vote for that constitutional amendment. The most historically accurate explanation of the voters’ intent in 1976 appears to have come from Elmer Rasmuson, the first chair of the permanent fund board of trustees: “The permanent fund began, chiefly, with a ‘negative’ goal, to place part of the onetime oil wealth beyond the reach of day-to-day spending.”

The permanent fund dividend, by contrast, was created in 1982 by the Alaska Legislature through the adoption of statutes, which are laws the Legislature can make without getting approval from the voters. The two institutions are fundamentally different. The permanent fund is a public savings vehicle, while the permanent fund dividend is per capita universal direct distribution.

 

2. Is the permanent fund dividend constitutionally guaranteed?

No. The Alaska Constitution contains no guarantee of any kind that permanent fund dividends will be paid. The constitutional amendment adopted in 1982 establishing a spending limit includes appropriations for dividends on a list of exceptions to that spending limit. That reference in Article IX’s Section 16, however, does not constitute any guarantee or requirement of payment.

 

3. Has the Alaska Legislature guaranteed the annual payment of permanent fund dividends through the Legislature’s adoption of statutes?

No. The Alaska Supreme Court answered this question definitively in 2017 in the case of Wielechowski v. State of Alaska. The Alaska Supreme Court ruled that the Alaska Constitution does not currently allow the Legislature to set up a system in which permanent fund dividends are paid in future years automatically. The Alaska Supreme Court stated: “Absent another constitutional amendment, the permanent fund dividend program must compete for annual legislative funding just as other state programs.”

 

4. Is the permanent fund dividend what individual Alaskans got as a trade when the Statehood Act reserved to the state of Alaska the mineral rights to the lands granted by the federal government under the Statehood Act?

No. The permanent fund dividend arose as a possible option during the 1976 debate about establishing the fund itself — more than 15 years after Congress adopted the Statehood Act in 1958. The Statehood Act provides that the “mineral lands” granted by the federal government to the state of Alaska pursuant to statehood are granted under the express condition that all sales, grants, deeds, or patents of those lands must be reserved to the state. This provision means that Alaskans cannot receive royalties as individual landowners from development of those mineral lands. The House Finance Committee adopted a letter of intent in 1982 regarding the legislation creating the dividend that included the statement “The Committee recognizes that virtually all the petroleum development in Alaska has occurred on publicly owned lands. This is in sharp contrast to other states, where vast accumulations of wealth have accrued to private landholders.”

Cliff Groh lives in Anchorage. Some of the material in this column overlaps with a chapter he co-authored with Gregg Erickson for a book published in 2012, one of four chapters Groh has authored or co-authored in academic books about the Alaska Permanent Fund Dividend and Alaska fiscal policy.

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