An engaged Alaskan democracy

What were the original arguments for the Permanent Fund dividend?

By Cliff Groh, printed in the Anchorage Daily News, 9/10/19

I was the legislative assistant who worked the most on the bill that created the Permanent Fund dividend in 1982. Advocates for the dividend offered essentially five rationales during consideration of the legislation that put in place the “equal payments for all” program we have today. The per capita dividend adopted in 1982 was the result of a bill that served as a backup — or backstop — for the original “the longer you’re here, the more you get” dividend created by a law passed in 1980, which quickly became stalled in litigation. The Alaska Legislature passed the bill providing for the per capita dividend as a backstop 11 days before the U.S. Supreme Court struck down the original dividend bill as unconstitutional, and so the first dividends were paid in the summer of 1982 under the backstop bill.

The five arguments for per-capita dividends made at the creation were:

1. Paying dividends out of the Permanent Fund’s income or earnings would build a political constituency to protect the Permanent Fund’s principal against raids by special interests. The logic: The bigger the Permanent Fund, the bigger the Permanent Fund dividend. A variant of this argument was that the dividend would strengthen political opposition to pork-barrel spending and budgetary hyper-growth.

2. Paying dividends would provide greater economic “bang for the buck” than spending the same amount of money on the operating budget, capital projects or loans to residents. A related argument was that compared to the alternatives, dividends would more efficiently allocate the surplus oil money coming into the state of Alaska’s coffers in the early 1980s.

3. Individuals have a right to use a portion of their oil wealth. This argument’s supporters pointed to the Alaska Constitution’s statement that “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.” Legislators recognized this individual entitlement to state-owned natural resources by adopting findings to the 1980 dividend bill stating that the legislation “fairly compensates each state resident for his equitable ownership of the state’s natural resources….” (The legislation in 1982 that created the per-capita dividend we have today had no findings, however, as some legislators considered such philosophical statements too controversial to include in the bill.)

4. Permanent Fund dividends would deliver benefits more equitably than alternative uses of the surplus oil money. Gov. Jay Hammond — the most important supporter of dividends — contended that the powerful and well-connected were already benefiting from the state’s oil wealth through special-interest appropriations, often arranged behind closed doors. The repeal of Alaska’s personal income tax in 1980 further tilted benefits toward higher-income people, some of whom were non-residents. The state’s highly subsidized loan programs were also cited as examples of inequitable distribution. As I noted in a document circulated in the Legislature during the 1982 session, per-capita dividends by contrast “treat all Alaskans alike — whether they are rich or poor, or whether their home is Adak or Anchorage.”

5. Universal direct distribution of a portion of the Permanent Fund’s income would fortify the safety net for low-income Alaskans. Hammond never thought much of this argument, but legislators concerned over what seemed to them a possible perverse effect inserted “hold harmless” provisions in the 1982 legislation authorizing use of the state’s general fund to offset loss of federal needs-tested benefits caused by receipt of a dividend.

Which arguments make sense now?

Cliff Groh, an Anchorage resident, says he considers his work on the 1982 Permanent Fund Dividend legislation perhaps his most interesting, challenging and fun job ever. Some of this material overlaps with a chapter he co-authored with Gregg Erickson for a book published in 2012.

Read the online opinion piece here.

Vic Fischer’s testimony on constitutional amendments

Interested in watching Vic Fischer’s testimony to the House State Affairs Committee on Tuesday, May 7, 2019? You can find it at this link.


Taxes and the Dividend

John Havelock, Anchorage Daily News, April 14, 2019

The first step in bringing a solution to our state budget issues is to combine a healthy dividend plan with the imposition of an income tax in one bill, possibly avoiding the one-subject rule by treating the dividend as a subset of the tax. The combination would make a Dunleavy veto difficult.

Put together with the dividend, the tax doesn’t seem so bad. You get paid $1,800 into one hand and pay back out of the other – nothing or, in rare cases, the whole thing, depending on how rich you are. Amazing how the majority of Alaskans who make too little to pay much in graduated income taxes are the angriest voices protecting the income of the well-off who would pay almost all the taxes.

It might help if more Alaskans realized that the Permanent Fund dividend is actually a social program, common in other Western countries, intended to support a minimum income floor. Sometimes it is called a “negative income tax.” Also common in Western Europe are forms of child support. Our dividend to babies and children serves the same purpose. The payments to a family with children bring an improved standard of child care.

The PFD’s societal purposes are especially relevant in Alaska with our large, rural, variable subsistence, low income population. The disappearance of the dividend will undermine village life, pressuring thousands of Alaska Natives to choose a life in large cities as the cash floor to the subsistence lifestyle is destroyed.

Of course expenditures are made deserving disapproval. That may be where the notion of “dividend,” a “payment of right,” helps to justify the program as well as saving the state expenditures relating to accountability. The public will favor a PFD but not separate appropriations for rural welfare or child support. We all prefer programs free of the government’s nose in our business.

The PFD is not the root of the state’s budget problem (per Roger Marks); the root of the state’s problem is the absence of a sustaining tax base. In most states, that’s an income tax. A new business coming into the state, bringing in new people, should pay its share. In Alaska, new business cuts everybody’s share. That’s why some economists have called our oil base “a curse.” In a tax-free state, it sets a fixed or declining amount of revenue for the public-service sectors of the economy.

The PFD is a program, a program requiring expenditures, like education, health, justice and welfare, or to cite a federal program, Social Security, which also sends money to people that need it or don’t in varying degrees and then taxes some of it back. Some Social Security dollars are no doubt spent on pleasures not related to specific needs of seniors. But it works and it had the required public support.

Whatever the original theory (and bless Gov. Jay Hammond and his legislative allies), the PFD is now an income maintenance program of critical importance to most of the state.

No doubt, after an income tax, there is still some deficit to be dealt with. At the top of the list for addressing the remaining deficit is a better look at oil taxes. In the era of Govs. Bill Egan, Jay Hammond and Wally Hickel, a split of one-third federal, one-third state and one-third industry was the rough standard for distributing oil revenue. We fall short of that now. We have heard the industry’s cry for 50 years that if you raise our taxes, we will take our bat and balls and go home. It just isn’t true. And handing out oil subsidies is just crazy, suggesting there has been way too much oil influence over the Legislature.

Maybe there is room for more budget cuts, but not much. We have been cutting and ignoring emerging issues (pre-K-12 for example) for too many years already. Maybe there are additional, incidental taxes to levy. A bit more on gasoline, a statewide shot at alcohol — which generates much more in costs than it gives in taxes — and a seasonal sales tax that brings the tourist industry in to pay a better share of the base.

Most of us take special pride in being Alaskans. How many times have you heard about the “old days” when we stopped on the highway anytime we saw someone in trouble? Those stories reflect the theme that Real Alaskans take care of those who need help. We don’t complain about people living on handouts when the economics of the state show that we are all doing just that. The Territorial Legislature passed an income tax. So, let’s call our legislators to a standard, working on a real solution — one that does no injury to Alaska values, one that reminds us to cough up our share as well as taking one.

John Havelock served as Gov. Bill Egan’s Attorney General and was on Gov. Jay Hammond’s Growth Policy Council and Gov. Wally Hickel’s Committee on School Organization. 

He’s also a founding member of Alaska Common Ground. Read the article in the Anchorage Daily News here.

The Alaska I helped build is under attack

Vic Fischer, Anchorage Daily News, April 19, 2019

As one of the founders of Alaska statehood, I am appalled by Gov. Mike Dunleavy’s proposed budget, which drastically cuts funding for K-12 education and the university, and slashes health services for 213,000 Alaskans, half of them children. It reduces support for seniors and undermines the taxing authority of local governments across the state.

The Alaska that I helped to build is under attack. When we wrote Alaska’s Constitution in 1955-56 and achieved statehood in 1959, we established a structure of state and local government to provide essential services. Now, 60 years later, the ideals of statehood and our constitution are under assault by Gov. Dunleavy and his people.

Alaska had education programs before statehood, and Pioneer Homes since 1913. We supported the University of Alaska, which has been preparing young people to advance Alaska’s economy since 1922. The state shared income with local governments since the 1960s. These are not new services; they are foundational infrastructure.

That is how government invests in its young to strengthen our future. That is how we strove to improve the quality of life for Alaskans to be healthy, educated and able to participate in community life.

If enacted, the governor’s proposed budget, legislation and constitutional amendments would radically transform Alaska into an impoverished state. Here are just a few examples of his terrible proposals.

Public Education Article 6, Section 1 of the Alaska Constitution states, “The Legislature shall by general law establish and maintain a system of public schools open to all children of the State and may provide for other public educational institutions.” Several court cases have articulated the responsibility of the state of Alaska to pay for education services throughout Alaska.

The governor’s budget reduces the per pupil appropriation for K-12 schools. This reduction would force school closures across the state and create K-12 class sizes in excess of 40 students. This proposal would make a mockery of our constitutional language and longstanding case law regarding the state’s responsibility for public education and access for all children.

Adding insult to injury, the governor’s attorney general claims that private school vouchers could potentially be used by parents to send their children to sectarian and religious schools — a clear violation of the constitution.

The largest proposed reductions have fallen to Medicaid, which provides health coverage for seniors, children and people with disabilities. Half of the beneficiaries are children. A Medicaid cut of $714 million puts 77,000 Alaskans at risk without health insurance. Perversely, Alaska would lose $465 million of federal matching funds.

Since 1913, Alaskans have maintained Pioneer Homes because we value our elders and are willing to give them a helping hand when they near the end of their lives. The governor’s proposal shifts the cost of care for seniors to the seniors in the Pioneer Homes. The cost to individuals could increase as much as 140 percent.

Basic human decency and our longstanding Alaska values call us to defeat such proposals.

Alaska’s constitution established the University of Alaska as the state university, continuing its role as the institution of higher learning since 1922.

The governor’s budget would cut state university funding by 41 percent, effectively requiring elimination of programs and closure of multiple university campuses.

We cannot have an educated and capable workforce, or solid economic growth, without a strong university. The governor and his advisers may not value our university, but Alaskans do and always have.

The administration assertion that the constitution only establishes a state university, but does not require its funding, is simply ludicrous and not worth responding to.

Article 10 of the Alaska Constitution established the structure of local governments. The boroughs and municipalities are part of the state structure and share responsibilities with the state government.

The governor’s proposal would confiscate hundreds of millions of dollars of local revenue from both fish harvests and pipeline infrastructure, shifting the tax burden onto local homeowners.

Dunleavy also proposed to cut school bond reimbursements to local governments for school construction bonds. Local governments cannot afford this cost shift, and the result would be unprecedented cuts in funds for education, which will force drastic increases in local taxes and reduction of services.

It is unclear whether the governor understands the details of his budget proposals, whose development was outsourced to an appointee from Michigan named Donna Arduin. Neither Ms. Arduin nor the governor have demonstrated any real understanding of the constitutional, economic and social impacts of their radical proposals.

Not surprisingly, Alaskans across the political spectrum have reacted with outrage toward the budget and related proposals. It is important to note that Mr. Dunleavy did not campaign on these proposals, but sprung them on Alaskans after getting elected by promising voters a windfall Permanent Fund dividend. He was not given a charter to destroy everything we have built since statehood and before.

Our state’s future really hangs in the balance: Do we protect our state’s constitutional ideals, our economy, our social fabric and the public institutions that have grown our state for decades? Or do we allow this governor and his appointees to liquidate the wealth and undermine the foundations that Alaskans have worked so hard to establish?

The Alaska Constitution gives the power of appropriation to the legislative branch. The cuts proposed by the governor will result in economic recession. If cuts are required, I ask the Legislature to please moderate their size and their effect on the less fortunate.

Alaska has financial resources garnered from the development of the natural resources located on Alaska’s 104 million acres of land. We also have untapped capacity to raise additional revenue to pay for needed government services. We have a revenue problem. Many Alaskans are willing to help pay for our public services, as we did for many decades.

Lastly, Gov. Dunleavy’s three proposed constitutional amendments tie the hands of future Legislatures facing issues that are unknown to us. Follow the model of the constitution. Allow them to grapple with the problems of the day. Reject the proposals.

Let’s remain true to our Alaska ideals and reject the governor’s proposals. I urge you to stand up in defense of Alaska and its future!

Vic Fischer is the last living delegate of the Alaska Constitutional Convention, 1955-56. He also served in the Territorial House of Representatives, 1957-58, and the State Senate, 1981-86. He was the founding Director of the Institute of Social and Economic Research at the University of Alaska. He lives in Anchorage.

He’s also a founding member of Alaska Common Ground.

Read this on the Anchorage Daily News page here.

Taming the Elephant in the Room

Author: Janet McCabe | Opinion | Anchorage Daily News | Feb 22, 2019

Last month a group of representative community members and economic experts organized by Alaska Common Ground met with an audience in Anchorage to discuss “The Costs of Alaska’s Economic Roller Coaster.” It was an enthusiastic and civil discussion, peppered with questions from an engaged audience and moderated by John Tracy. These people clearly loved Alaska and cared about its future prosperity.

They all emphasized that we were at a turning point in the state’s history and should take a long-term view to achieve fiscal stability. New sources of state revenue were essential. Most reasonable cuts have already been taken. There was also consensus that moderate dividends should be continued. During the discussion Tracy asked the audience for their opinions by a show of hands. Most supported all points of consensus. Video of the discussion can be reviewed online.

This month, Alaska’s new governor, Mike Dunleavy, also chose fiscal stability as the focus of his budget plan. But Dunleavy’s proposals are radically different from those of the Anchorage community leaders. He takes new revenue totally off the table. Faced with the looming fiscal shortfall, Dunleavy would cut $1.8 billion from the budget, eliminating state funds for programs that people rely on and have been developed with years of effort.

On the other hand, he would spend about $1.8 billion for supersized dividends. Sen. Natasha von Imhof, chairwoman of the Senate Finance Committee, has aptly referred to Dunleavy’s supersized dividends as the “elephant in the room.” When questioned about this plan, Dunleavy’s spokespeople say he wants to let Alaskans decide how to spend the money, not government.

Unfortunately, this answer ignores the fact that government – accomplishing together what we cannot do as individuals – is essential to life in a functioning community. Try driving across town when the streetlights aren’t working to clarify this concept.

Dunleavy’s cuts are wide-ranging, but many reduce services to those who are poor or live in small communities and would be unlikely to speak up. When asked about the proposed cuts to maintenance of airstrips in small remote communities, the governor’s spokesperson replied, “We can’t be all things to all people.” Tell that to someone with appendicitis.

Alaskans pay for governmental services at the municipal level, but only minimally at the state level. Across the U.S., per capita broad-based state tax revenues are about $2,600 for all the states. In Alaska, the figure is about $540. John Tracy asked the audience at Alaska Common Ground if they would be willing to pay $2,600 in state taxes. To his surprise, most raised their hands that they would. Taxes should and could be set to spare those with low to moderate incomes, and to tax people who earn in Alaska but reside Outside.

The Legislature has been questioning Dunleavy’s spokespeople on many fronts. A recent exchange involved his move to switch from state-run to private prisons. Would a business whose profit depends on the length and amount of incarceration implement programs that cut the need for incarceration? It should be concerning that the governor chose Wildwood Correctional Center for initial cutting. Wildwood is the prison that had started to implement innovations in prison management from Norway and Ireland that reduced post-release crime by as much as 20 percent, as seen in the documentary “Breaking the Cycle” on Netflix.

Alaska’s legislators are up against a challenge. The governor has veto power over all bills, and our Constitution (Article 2, Section 16) requires an affirmative vote of three-fourths of the Legislature to override a veto of a budget-related bill.

If the legislators want to counter the governor’s plans for Alaska, they will need to work together.

But, it’s possible. Last year’s Legislature successfully worked across the aisle to adopt SB 26, establishing the percent-of-market-value (POMV) endowment system for sustainable annual draws from the Earnings Reserve Account, the spendable part of the Permanent Fund. This year, through a similarly united effort, the Legislature could pass a new bill establishing the annual apportionment of POMV funds between dividends and other governmental costs. If enacted early this session, there would be time for the governor’s expected veto, and for the Legislature to override his veto.

The act should be effective immediately. It would convert Sen. von Imhof’s “elephant in the room” into a manageable reality, protecting the dividend for future generations and leaving part of the state’s current revenue available for state government. The Legislature could then proceed to pass a reasonable budget including needed programs and the new revenue measures necessary to fund them. The public would appreciate it!

Janet McCabe and her family have lived in Alaska since 1964. Her education and experience are in community planning with a specialty in population projection. She is actively involved in several nonprofit organizations, including Alaska Common Ground and Commonwealth North.

https://www.adn.com/opinions/2019/02/23/taming-the-elephant-in-the-room/

The Costs of Alaska’s Economic Roller Coaster

Janet McCabe, opinion piece in the Anchorage Daily News, January 27, 2019

With more of a rumpus than a clear public mandate, legislators must study, learn and think independently as statesmen and stateswomen, and work across the aisle.

Alaska Common Ground invites you to a public forum on “The Costs of Alaska’s Economic Roller coaster” on Jan. 27 from 4 p.m. to 6 p.m. at the 49th State Brewing Co. in Anchorage. A panel of community leaders and ISER economist Mouhcine Guettabi will present their different perspectives on the costs of instability, possible solutions and their vision of Alaska’s future. Do join us and ask questions. Alaska Common Ground forums are free, and everybody is welcome and encouraged to attend.

Read the full article at the Anchorage Daily News here.

Costs of Alaska’s Economic Roller Coaster

Sunday, January 27th, 4 – 6 pm
49th State Brewing Co
717 W 3rd Ave, Anchorage

We’ve been here before. Petroleum revenues have benefitted Alaska greatly, but these revenues are highly volatile and largely at the whim of global forces beyond state control. Alaska Common Ground recognizes that to achieve a strong and stable economy our state will need an ongoing income stream large enough to pay for essential state governmental services. This event will examine the costs of a start-and-stop economy and the benefits of a stable source of state income.

Senator Lisa Murkowski invited to open the discussion: Serving Alaskans by Working Across the Aisle

Panelists’ Perspectives: Moderated by John Tracy

  • Business – Angela Libal, Owner, Title Wave Books
  • Banker – Joe Schierhorn, Chairman, President & CEO, Northrim Bank
  • Labor – Ryan Andrew, Business Representative, IBEW Local 1547
  • Municipal – Larry Persily, Former Chief of Staff, Kenai Borough
  • Rural – Greg Razo, VP Government Relations, CIRI
  • Service – Mark Schneiter, Schneiter & Moad CPAs

Economist Response: Mouhcine Guettabi, UAA ISER

There will be time for your questions
Pizza and beverages available for purchase

Cosponsored by the Anchorage Public Library and
the League of Women Voters of Anchorage

Alaska’s Fiscal Reality

Ready to delve into Alaska’s fiscal issues? Here are the slides from House Speaker Bryce Edgmon’s presentation to AFN in October. We’re looking to host a discussion on the issues raised by this information.

Click on this link to check out the slides.

The Salmon Initiative: Beyond the Rhetoric

Thursday, October 4th, 7 – 9 pm
49th State Brewing Company

Wondering how to vote on ballot measure 1 in the general election this November? We held an event discussing the pros and cons of this ballot measure. You can find out more about this event and watch the video or listen to the audio here.

 

 

Member Survey Results

Thanks again to all of our members and guests who attended Alaska Common Ground’s 2018 Annual Meeting in April and to our members who participated in our recent membership survey. Both provided an invaluable opportunity for us to hear how you think we are doing and what topics you would like us to feature in the future.

Housing, fiscal policy, criminal justice reform, oceans, food security, and the upcoming ballot measures were among the ideas discussed. Additionally, this word cloud shows what our members highlighted as most valuable to them about their experience with ACG, from our neutrality, to staying informed on important issues.

Alaska Common ground survey 2018 results

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