Wednesday, July 27, 2016

"Leave My Damn Dividend Fund Alone" Ignorance, Greed, and The PFD

I've passed this sign a few times and it seems to beg for comment.

This is a big sign.  Someone really wanted to make a statement about how he felt.

But if I were doing this, I'd try to get my facts straight.

There is no 'dividend fund.'

There's an Alaska Permanent Fund, from which Alaska residents get dividends.  The governor and others have outlined why the current budget shortfalls cannot be solved by simply cutting the budget. There have to be additional revenue sources.  One source the governor has identified, and the only source the legislature has followed up on, was the money set aside for Alaska Permanent Fund dividend checks.  He also asked to radically change the subsidies to the oil companies, and for an income tax and sales tax.

It's NOT 'your' fund

It belongs, according to the Permanent Fund Board website, to the State of Alaska.  And
"The Alaska Constitution says that the principal may not be spent. The earnings in the earnings reserve may be spent by the Legislature for any public purpose, including the Permanent Fund Dividend distribution."
It was NOT set up to give everyone a dividend check each year.  That was added later.  

It's a collective pool of money for the benefit of people who live in Alaska, now and those who will live in Alaska in the future.  So, for Alaska residents, 'our' might be acceptable, but not 'my' fund.  

What does this sign tell us and what doesn't it tell us?

1.  This person (let's call him Sam) is imprecise, since he's gotten the name of the fund he's so exercised about wrong.  We don't know if it's

  • ignorance (he doesn't know there is an Alaska Permanent Fund, he just thinks there's a dividend fund), 
  • carelessness (he knows, but wrote this quickly and didn't check), or 
  • greed (he just wants free money and doesn't care what it's called.)

2.  Sam  doesn't seem to grasp the perilous state of the Alaska budget as described in the link above.  And probably doesn't have a clue about all the ways he benefits from state spending - on roads, parks, schools, law and order, etc.  And how, if we don't find a way to fund the state budget, he'll probably lose more than he would get from the part of his dividend the governor has vetoed.

3.  Sam has a short-term horizon, not a long-term view.  Actually, I don't have enough info to know this for sure.  There are questions that could move us along to finding out.
  • Sam has heard that come October, he'd get about $1000 less this year than he would have, if the governor prevails on this, and doesn't like that.  
  • Sam doesn't understand that the Alaska Permanent Fund was set up originally to preserve the oil earnings for future generations on the grounds that the oil is a non-renewable resource and no single generation should use the wealth it generates and leave nothing to future generations.  The dividends were an afterthought, a way to keep Alaskans interested in the fund's performance.  They were not the purpose of the fund.  The intent . . . well, there were many intents mentioned as it was being debated and it seems each Alaskan picks the intent that fits their interest best.  For me, the intent was a fund that could provide future Alaskans an annual annuity toward the state budget, supplemented by other income as needed, like an income tax.  By investing the extra oil money into a permanent fund, Alaskans, like wealthy families, would be able to take a portion of the annual earnings and spend it on government when the oil was gone.   If you can have enough self control, the fund will keep earning money into perpetuity.  But that means not killing the goose that lays the golden egg.   That way the oil wealth wouldn't disappear when the oil disappeared and future generations would benefit.  That could happen.  As I write, the fund is worth $54.608 billion.  
  •  Sam understands all this, but just doesn't trust any government, now or in the future, to use the money wisely and thinks he's better off using the money himself than letting the legislature spend it.  Given the current legislature, he may well be right.  But that's why the Constitution prohibits the legislature from using the principal of the fund.  The most they can waste is the annual earnings.
  • Sam has no idea of all the ways he benefits from government spending, he just takes these things all for granted, without realizing that government provides them.  So he doesn't know how his life would take a turn for the worse if it got cut even more.  Or how much more it would cost him than the $1000 he stands to lose now. 

Sam displays a sense of entitlement to his PFD check that other Alaskans also seem to have.  They deserve it for some reason.  Technically, yes, as Alaskans we are all eligible for the check, but I feel like we're pretty much getting something for nothing.  People in other states don't get checks like these.  And the amount we get is a lot more than most people would get if the formula hadn't been changed.

Originally, the dividends was set to be $50 per year of Alaskan residence back to the beginning of statehood.

Under that formula, only people who have lived in Alaska continuously for 25 years would have gotten the full $1281 last year.  Which would mean that for someone who came to Alaska five years ago, the dividend check would be $250.  Those who have lived here longer would have gotten more.

It got changed to the current formally due to a lawsuit that successfully challenged the formula on the grounds that it violated the equal protection clause of the 14th Amendment.

The state would be paying much less in dividends today had the original formula held.  How much less is tricky to calculate without knowing how long every Alaskan has been in the state,  and I couldn't find that kind of information quickly online.

I did find a Report on Alaska mobility that shows from IRS data that between 2000 and 2010, 25,000-30,000 people moved to the state per year.  So in 2010, there were about 250,000 people who had come to the state in the last ten years and since the annual change was evenly distributed over those ten years, we can say that there were about 250,000 who'd been in the state about five years on average.

Based on the original dividend payout plan ($50 per year of residence) those folks would only have been eligible for (on average) Based on the original dividend payout plan ($50 per year of residence) those folks would only have been eligible for (on average) $250 instead of the $1281 payout everyone got.  So instead of those 250,000 people getting $1281 last year for a total of $320 million, they would have gotten $62 million and the state would have saved about $250 million, just on the people who came to Alaska in the last ten years.  That doesn't count all the people who were in the state less than 30 years.  The number of folks who have been here since statehood is rapidly declining, so while they would be earning quite a bit more, there aren't too many of them.

So, I really don't know who Sam is or why he's put up this sign.  I don't know if he's been here five years or fifty.  I don't know if he uses his dividend to pay off accumulated bills or on a Hawaiian vacation, if he supports Clinton or Trump.  Nor do I know the folks who have written letters to the editor voicing the same sentiment.  It would be interesting to actually meet these people and find out what their actual motivation is.  Until then, I'll resist the temptation to make assumptions about them.


  1. Sam might also ask if that money for the budget is being spent wisely (Goose Bay Prison, Seafood Processing Center, Basketball only UAA Arena, Point McKenzie Dairy Project, Valdez Grain Terminal, Healy Clean Coal Project, First Goose Bay Prison, UAA Shootout Tickets giveaway, Cold Bay King Cove Hovercraft, 32 mile extension AKRR, Whittier Tunnel, ARC (Alaska Renewable Resources Corp.), Delta barley project, Knik Arm Bridge, Susitna Dam, Juneau Road to Nowhere, Taj Mahawker, Fertilizer Plant tax break, Parking Garage slush account, Mat Maid Dairy). Sam might ask why we have spent over 500 million dollars on a pipeline that will never be built. Sam might ask why we are paying a per diem for a legislator who was in Germany. Sam might say the PFD money for the most part goes directly into the local economy. Sam might say ‘hey I could spend that money better’. Sam might say listen to Gunner Knapp ‘In an analysis presented to lawmakers this month, Knapp estimated cutting the PFD in half could cost more than 6000 jobs statewide — and pull about a billion dollars of income out of the state economy.’ Sam might say take your dividend and ‘click, pick give’.

    oliver optic

    1. Oliver, yes, this is persuasive for many and it's what I mentioned without the detail in the third bullet point in #3. I don't object to leaving the PFD where it is, but the budget needs some revenue. There are critical programs - education, roads, policing, courts, and others. Without more money they will be cut to the point that NOT having them will cost more than funding them. And the legislature isn't budging on an income tax or the oil tax relief. So while hindsight is persuasive, the lesson should be to elect legislators more carefully and have more checks on them. AND raise some revenue to pay for government.

  2. Sam might also be one of the Mormon or Quiverfull cults who have 13 or more children and is getting so much money from the PFD he doesn't have to work. The sense of entitlement in these folks is "Yuuuuuugggge." They don't care what the State does for them, their greed is unlimited.

    1. Anon, I try here not to make sweeping generalizations about groups of people. But I also wouldn't be opposed to a limit on the number of children one household could claim. Though I suspect there would be lots of ways to get around that, which might have negative consequences on the kids.


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