On February 5, 1956, the Alaska Constitution was was adopted by 54 out of 55 delegates in Fairbanks, Alaska. On April 24, 1956, it was ratified by the people. The delegates at the constitutional convention aimed to produce a general document which left broad authority to future state legislatures. When the Trans-Alaska Pipeline was under construction, the Permanent Fund was approved by voters and became an amendment in the Constitution (Article IX, Section 15). It was designed to invest 25% of the oil revenue money into a dedicated fund for future generations of Alaskan residents. The other 75% of money from natural resource industries, especially the oil companies, is put into the general fund where the state can use it for necessities, public services, and projects.
When the Alaska Constitution was written, the authors made sure to specifically prohibit the dedication of state revenues. This means that the government was not allowed to automatically assign a portion of the state’s money to a specific source. The Permanent Fund is a specific source that the state is required to dedicate money to, so the people ratified the Constitution and made this the one exception to the rule.
The Alaska Permanent Fund was created with the understanding that oil revenue would one day stop, since oil is a limited resource. The government wanted to establish stability for future Alaskans in preparation of revenue-making sure that natural resources don’t eventually run out. In other words, the Alaska government knew that they could not rely on the money from oil forever, so they decided to create an entity unlike any other in the world: the Permanent Fund.
One fourth of all revenue that comes from natural mineral resources, like oil, is placed into the Permanent Fund Principal. The Principal, under no circumstances, can be spent; it is protected by laws which prohibit it. Instead, the Principal is specifically set aside for the purpose of investing. The only way to increase the Principal is by the dedicated mineral revenues, and if the legislature has extra money to put in. In essence, the Permanent Fund Principal can be compared to a giant Alaskan savings account that never declines; it is basically money that makes money off of investments.
All the money that is made from investing the Principal is put into the Earnings Reserve. There are three places where the money in the Earnings Reserve can go: back into the Principal to inflation-proof its value, the distribution of Permanent Fund Dividends, and directly into the general fund for public spending.
Each year, every eligible Alaskan can apply for their Permanent Fund Dividend. This money does not come from general fund, but rather the invested money made by the Principal. The amount each resident gets changes constantly due to the performance of the natural resources industry. A formula is used to determine how much each eligible resident gets: add the statutory net income (original 25% of oil revenue) from the last five years together, multiply this number by 21%, divide by 2, and divide that by the number of eligible applicants who will be receiving the Dividend.
The lowest amount ever given was in 1984 at $331.29, and the highest should be this year at around $2,300. However, current Governor, Bill Walker, has somehow vetoed a portion of the Permanent Fund for the second year in a row. On October 5, each Alaskan will receive $1,100 instead, which is around $1,200 less than the statute allows us to have.
Of course, Governor Walker is claiming that the money he takes can be put toward public good. He can use it for necessities and projects that benefit Alaskan residents. However, the problem with this is that because of the statute, the Dividend money belongs to the people. A problem arises when the government is not responsible with their spending habits, otherwise, money should never be an issue in Alaska. A deficit wouldn’t exist if the government wrote a budget based on the income that they actually have.
The Permanent Fund Principal was created so that the Alaskan government could make investments large enough that oil revenue money was no longer necessary in providing for its citizens. The Principal, or the money which cannot be spent, is currently at $61 billion. Last year, the investment money from the Principal alone made $6.8 billion. Part of that money was given out as Dividends to eligible Alaskan residents (some of which was taken by Governor Walker), some went back into the Principal to inflation-proof its value, and the rest went directly to the general fund.
Not only does the Alaskan government receive about half of the Principal’s investment revenue after the Dividend and inflation-proofing money is removed, but it also receives the original 75% of revenue money from the natural resources industry. And this isn’t the only place where the government gets funds; through taxation, fines, penalties, and many other sources, the government should not have a deficit if our representatives can responsibly handle the money they receive.
First and foremost, the government should spend its money on necessities: public educational systems, police/fire fighting forces, road maintenance, etc. If the government wishes to spend money on a new project, they should be able to prove that the project will bring back revenue for the state, like a road system to a mine or a power plant. If the government needs to make budget cuts in the school systems or police force, or take money from the people through their Permanent Fund Dividends, a change needs to be brought about. Cutting money from such relevant and important sources would never be done by a responsible government.
The founders of the Alaska Permanent Fund kept the future of the state in mind when they created this powerful entity. They knew about the greatness of Alaska, and the people who lived here. They wanted to create a system which allowed the government to give back to its citizens, in order to make the state as a whole prosper for generations to come. Right now, Governor Walker is fighting to take away what belongs to the people. This has nothing to do with political parties, and in the end it has very little to do with the money itself. This has more to do with what is right, what is legal, and what our elected representatives are doing with our state. Will we sit back and watch the people we have given power to destroy this could-be magnificent place? Or will we stand up for ourselves and our rights, and prosper? Only time, effort, and change will be the judge of that.