The Permanent Fund

The Alaska Permanent Fund is perhaps the greatest single achievement of our state politicians in the last 25 years. What is remarkable is that our generation, instead of spending every dollar, created a Permanent Fund to benefit Alaskans - potentially forever.

But some politicians cannot seem to leave well enough alone, and the dividend has come under attack, threatened by a half dozen proposals to cap, reduce or eliminate it. It is time to protect the dividend and remove it from the budget debate altogether.

The original constitutional amendment creating the Fund stated:

• At least twenty-five per cent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the state shall be placed in a permanent fund, the principal of which shall be used only for those income producing investments specifically designated by law as eligible for Permanent Fund investments. All income from the Permanent Fund shall be deposited in the general fund unless otherwise provided by law. (AK Constitution Art.IX, Sec.15)

According to the 1998 Alaska Permanent Fund Corporation Guide:

• The driving force behind the Permanent Fund was concern that the vast and fast-flowing oil wealth from Prudhoe Bay would be drained as soon as it flowed into the state treasury. Little or no money would be left for subsequent generations . . . The Permanent Fund comes from the oil owned by the state of Alaska. Like the oil, the Fund belongs to the people of Alaska collectively."

The principal of the Fund has been carefully invested and expertly managed, and Alaskans receive what no other citizens of any other state, nation or land have ever shared: an equal dividend from the growth of long-term, prudent investment of our jointly owned non-renewable resources.

The Legislature determined the best public purpose for earnings from the Permanent Fund would be individual dividends and inflation-proofing. In 1982, the current dividend program was enacted, however, the Legislature left unanswered what to do with any excess earnings after dividends and inflation-proofing had been paid. Subsequent legislatures took leftover earnings and deposited them back into the Permanent Fund principal. A full third of our Fund principal comes from these special legislative deposits.

Countries from around the world, state governments, financial organizations - including the World Bank - have inquired about the astonishing success of Alaska's Permanent Fund and our unique dividend program. Alaska's program of saving for the future and investing one-time wealth to create more wealth for sustained prosperity is a success story of which Alaskans have every right to be proud.

The People of Alaska: Shareholders and Guardians

Each of us has an incentive to be a vigilant guardian to preserve and protect the long-term growth and stability of the Permanent fund, insuring Alaska's financial strength for generations to come.

• The Permanent Fund dividend is distributed equally, regardless of race, age, sex, creed or religion
• Dividends operate as a check and balance keeping government spending and taxing under control
• Dividends tie the people of Alaska directly to the Permanent Fund and economic development

As equal shareholders of our oil, every Alaskan gets a tangible benefit from resource development when they receive their annual Permanent Fund dividend. This ensures a unique direct connection between economic prosperity, long-term investment, state resource development and the personal financial interest of every Alaskan. Every cubic foot of gas, every barrel of oil, and every profitable Permanent Fund investment generates a bigger dividend for every Alaskan - a powerful incentive for economic development.

Constitutional Protection for the Dividend

The Constitution protects the principal of the Permanent Fund, but the earnings of the fund have no constitutional protections whatsoever. Dividends, inflation-proofing and unspent earnings are at the mercy of each legislature, each year.

Senate Joint resolution 35 (SJR 35) is a constitutional amendment to guarantee the successful 18 year history of providing for dividends, inflation-proofing and undistributed income. SJR 35 gives the current statutory formulas for distribution of Dividends and Inflation-proofing constitutional protection.

Only a constitutional amendment can mandate a vote of the people. Once Alaskans are confident the dividend is safe and the integrity of the Fund's principal is protected from inflation, they may be ready to begin the discussion about what to do with any excess earnings. But, the first step is to restore the peoples' trust. I hope to give that trust back with the passage of SJR35.

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