The people of Alaska voted to create the Alaska Permanent Fund in 1976. Initially funded by a share of Alaska’s oil royalties, the Permanent Fund has grown in value during its 45-year life to now approach $83 billion. Financial success is certainly something to seek and celebrate, but what beyond growth is the public purpose of the Permanent Fund? To best answer that fundamental question, one needs to turn back the clock to 1976 and determine what was the underlying voter intent for over 75,000 Alaskans to fill in the “yes” circle on their ballot. And since I was an eligible voter back in 1976 and proudly cast my favorable vote for this measure, I do have a personal experience to share regarding that very important day in Alaska’s history.
I am only one of two current members of the Alaska State House that were both state residents and old enough to cast a ballot back in 1976. As I recall, the dominant argument for establishing the Permanent Fund in 1976 was to set aside a portion of our royalty income for the benefit of future generations. We had a sense of urgency to act as the estimated life of the Prudhoe Bay Oil Field was about 25 years at the time. Oil started flowing through the trans-Alaska pipeline system in 1977 so our voter action to realize the maximum benefit for the Fund was both timely and immediate. The positive vote was overwhelming by a two-to-one margin.
The Alaska Permanent Fund amendment to our Constitution can be found under Article 9, Section 15 and reads in part: “The income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.” Under the “unless otherwise provided by law” authority, the Earnings Reserve Account was established to act as a depository of Fund earnings pending their appropriation by the Legislature to inflation-proof the fund, operate the fund itself, or deposit earnings and realized gains into the State’s general fund. No mention was made in the Constitutional amendment language regarding a dividend program.
TAPS is now less than 25% capacity and has been on a throughput decline for approximately 30-years. With lower throughput and lower prices, we are now faced with this financial reality: How do we allocate state revenues — be they royalty income from the sale of our oil, investment earnings from the Alaska Permanent Fund, or other fund sources such as taxes collected or fees paid — on spending wants such as any part of State government and the annual PFD payment. Then, what spending action enjoys the highest priority and at what level? The state Legislature is tasked with the annual duty of passing a budget that balances the collective needs and wants of all Alaskans and to do so in a manner that matches revenue sources with expenditures. Alaska is not unique in this task as every state must also pass a balanced budget. However, not every other state has a permanent fund that provides two-thirds of the annual revenue required to complete this task.
I believe that the annual dividend payment is important to most Alaskans and is a program worth defending. Nonetheless, the size of the dividend needs to be balanced against the funding of constitutionally mandated state services such as public safety, K-12 education, health services, and the university system to name just a few. Although it took about 35 years for us to arrive at this crossroads, those of us who voted to establish the Alaska Permanent Fund back in 1976, knew the day would come when the earnings of the Permanent Fund would be needed to support essential state services — with or without a dividend program.
I suggest to you today that the primary voter intent back in 1976 was to establish a state savings account to help pay, at some future date, the expense of operating our state government. I know that was my vision for voting “yes” 45-years ago. The first dividend check followed six years later and has been an annual godsend to many Alaskans, but it does not merit enshrinement into our state constitution as a right. Doing so would be equivalent to saying that the dividend payment trumps all other state needs now and forevermore and I just cannot buy into that argument. The dividend is important, but so too is our criminal justice system, support for resource development, and the maintenance of our highway system.
I look forward to working with my colleagues in Juneau over the next several months as we strive to balance the collective needs and wants of all Alaskans through the crafting of a sustainable dividend formula that will not impair the Alaska Permanent Fund by leveraging future generations. We need to live within our current means and not at the expense of our children and grandchildren and that should be a goal all elected officials can share without debate.