Some newer Alaskans may not understand why they will be receiving a check from the Permanent Fund after only one year of living here.
They might wonder why the government is handing out money instead of forcibly taking it with an income tax.
For the benefit of new and old Alaskans, let’s look at the evolution of this bounty distributed annually to those who have lived here at least one year.
The first Permanent Fund Dividend check for $1,000 was issued in 1982, following a bruising court battle, in which the initial plan for a distribution of dividends–with amounts given on a graduated scale based on length of residency–was ruled unconstitutional by the Alaska Supreme Court. The formula for determining how much would be given out was changed and has been used now for over three decades.
That first dividend check was signed by Commissioner of Administration, Carole Burger, because Republican Gov. Jay Hammond feared there might be a political backlash from Alaskans known for disdaining government handouts. I personally worked for Ms. Burger in Juneau two years and she told me the story herself.
Upon statehood the greatest hope for Alaska’s future was seen to be in oil development. President Dwight D. Eisenhower had stated his support for Alaska statehood early in his administration but also expressed concerns that needed to be overcome before that could occur. The greatest concern was the issue of national security; this was during the height of the Cold War and Alaska was on the border of the Soviet Union. Another concern was the amount of public land in the territory; 99% was owned by the Federal government and a suitable compromise had to be arranged to transfer unreserved lands to the new state government if it was to be viable.
With a large landmass and a small population, Alaska has always depended upon natural resource development to support government.
The mere fact Prudhoe Bay was located on land chosen by the state under the Statehood Act, instead of on federal land, has meant economic bounty for Alaska.
In response to passage of Alaska Statehood Bill H.R. 7999 in the U.S. House of Representatives, which ultimately led to statehood, various public officials offered information into the public record about the potential good and likely challenges of Alaska statehood. One of those, Fred Seaton, Secretary of the Interior, on June 24, 1958 offered an overview of Alaska’s potential viability with a report citing the following:
- Population of Alaska: 220,000 of which approximately 50,000 are military.
- Gross Product from Alaska resources: (1957) $161,846,000, an increase of 18 percent over 1956. Of this amount, approximately $92.9 million was from fisheries; $34.3 million from timber; $24.6 million from minerals; and $1.5 from the fur industry, “exclusive of the Pribilof fur seal production. The Pribilof production amounted to $5.2 million.”
- Federal Taxation: Alaska residents paid some $45 million in federal taxes that year with an additional $20 million coming from nonresidents who did business in the state.
- Cost of Statehood: As a political strategy of gaining statehood, (The Tennessee Plan www.alaska.edu/creatingalaska/statehood-files/tennessee-plan/admission-of-the-bold/) the Alaska Founders set up a constitution and state government. The federal government under the Organic Act, had retained jurisdiction over administration of justice, the Governor’s Office, and partially supported the legislature and other miscellaneous functions of government. Alaska had some 58 different departments, boards, commissions and other governmental agencies supported by Territorial appropriations. The cost of statehood was estimated to be about $6,350,000 for assuming governmental functions previously performed by the Federal Government.
Specifically, in this report Secretary Seaton predicted: “Alaska’s growing oil and gas lease income should offset this cost.” eisenhower.archives.gov/research/online_documents/alaska_statehood/1958_06_24_Seaton_to_DDE.pdf
The reason this is important in a discussion of why we have a Permanent Fund, is because of what our state constitution declares: The legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people. (Article VIII Sect. 1) Former Alaska Gov. Walter Hickel, who was also Secretary of Interior for a short time, believed every Alaskan was an owner of the state through this resource development endowment; he called this the “Owner State.”
One argument for the Permanent Fund at the time was based on the reality that a hypothetical “Little old lady in Chicago” who owned stock in an oil company extracting Alaska resources would receive dividends from her ownership. Since all Alaskans–through our constitution–also own the resource, why shouldn’t we also receive regular dividends? A majority of Alaskans knew our state needed to invest in infrastructure, but the last thing we wanted was to replace a Federal Government bureaucracy overseer, that owned 99 percent of the land prior to statehood, with an equivalent State Bureaucracy. Alaskans yearned for a prosperous state with responsible resource development and robust commerce.
So the Annual PFD is NOT a government handout. The PFD is a dividend for our collective investment in resource development.
This investment return, from the efforts of our oil industry company partners, enriches the state by paying for most state government, providing income compensation to residents in an inflated economy, and rewarding mutual responsibility for perhaps the most environmentally responsible oil development effort of this scale ever endeavored. We all should be proud recipients of our individual investments with this annual dividend!
Today state government is the largest employer in Alaska, and some of those state employees at the Department of Revenue manage to do a pretty good job of distributing PFD payments to grateful residents one time per year. But the Permanent Fund was established by the Alaska Legislature and signed into law by Gov. Hammond. That means payments to Alaskans from our mutually-held endowment are subject to the whims of politicians who say one thing when they are running for office and quite another when the special interests who paid for their campaign call their debt due.
Thanks to our current governor, who in recent years has shown us how vulnerable our Permanent Fund is, Alaskans must now consider installing the Permanent Fund–and the longstanding formula used for payment to eligible Alaskans from the fund–into the Alaska Constitution. This amendment is necessary because the founders would have never imagined what might happen from great resource development wealth, but they rightly assured that the benefit should be for Alaskans.
Donn Liston has lived in Alaska since 1962 and in Eagle River since 2010. He was a reporter for the Anchorage Daily News during pipeline construction and is now a teacher after becoming certified in Juneau after living there 20 years. He has taught Adult Basic Education for the last 10 years. To reach Donn, email: [email protected].