Permanent Fund helps all Alaskans
The benefits of the Permanent Fund shared equally have had a very positive effect. Because of the dividend program, income disparity in Alaska is the lowest of any state. It provides for many low-income and workingclass families. and we have achieved a higher degree of social justice because of it. It is projected to produce $4 billion annually in four years if we protect it.
The political value of the dividend lies in how it protects the fund from which it comes, from wasteful legislative spending. Without the dividend program the constituency that protects the fund is reduced and fund profits can be taken for building any development which legislators imagine. A bond issue for the $50 billion gasline? No sweat! The bonds can be paid off with fund earnings. Ports? Dams? Bridges? Here we go again.
Historically about half the fund’s earnings have gone to inflation proofing — $16.2 billion of the present $40 billion in the fund came from inflation proofing. For the first time since the beginning in 1982, the Alaska Legislature has not provided for inflation proofing (there was one year when there was no inflation to proof against).
The 2016 raid on the permanent fund consists of two things: not inflation proofing and cutting dividends about in half leaves Permanent Fund income of $2 billion or so in the hands of the legislature to budget away in 2017. Meanwhile the fund loses value and the ability to continue to produce the great revenues that it has.
In my view state operations costs need further reductions and different revenue sources than the Permanent Fund.
I’d begin with increased royalties on our publicly owned resources: start with oil and gas royalties at 50 percent, 12 percent on replenishable resources such as commercial fishing takes, agriculture and water uses, and timber. Minerals could pay 20 percent. The income tax should be restored at the 16 percent of federal level.
I would consider joining other western states in a comprehensive self-insured program. The obscene profits in the insurance-pharmaceutical-medical industrial complex must be eliminated. Health care without insurance premiums.
I would eliminate AIDEA, AHFC and other hoarders of state billions in accounts used for subsidized loans and credits, benefitting what Jay Hammond called the 6 percent. Put half the dough they have squirelled away into the Permanent Fund and half into state service programs. Eliminate Alaska Department of Environmental Conservation and transfer the authorities and functions to the Alaska Department of Fish and Game and the Alaska Department of Natural Resources. Money in the gas pipeline accounts should be returned; half to the Permanent Fund, half to the general fund.
This is the time to grow not deplete the Permanent Fund. Grow it by half and there can be enough income for dividend, inflation proofing, and general state programs. Grow the fund by half and it may soon produce $6 billion in annual income.
The Permanent Fund Corporation projected $4 billion in revenue in four years. But without inflation proofing it won’t happen.
We hear the laments of the 6 percent who have gotten used to the benefit programs from the non-PF dollars from the 85 percent of oil revenues which have not gone into our fund. Six percent plus, if I could guess, another 25 percent who have lived the lavish life provided to those who knew how to cash in on the oil economy. About the same number who were outvoted in previous attempts to raid the fund.
As Jay Hammond pointed out the elimination of oil and gas severance taxes from going to the fund cut the proposed contributions in half, reducing them to no more than 12.5 percent. If that first raid had not been done by the legislature, today we would have the money to float more boats.
Larry Smith is a longtime Homer resident and the corresponding secretary of the Kachemak Resource Institute, publisher of Jay Hammond’s last book “Diapering The Devil, How Alaska Helped Staunch Befouling by Mismanaged Oil Wealth,” copyright Bella Hammond.
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