Clem Tillion: Open letter to the 32nd Alaska Legislature on the Permanent Fund dividend - Must Read Alaska
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Friday, October 22, 2021
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Clem Tillion: Open letter to the 32nd Alaska Legislature on the Permanent Fund dividend

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Distinguished Members of the 32nd Alaska Legislature:

Before writing this missive, l gave considerable thought to whether or not I have anything relevant to add to your deliberations.

After all, I am 95 and the contemporary political scene is much changed since I served in the Alaska Legislature.

On reflection and as I have been paying close attention to what is transpiring or perhaps not happening down in Juneau, I do have some general guidance that may assist in addressing some of the difficult challenges facing Alaska.

The demands of the present that command much of your attention are, in some regards, in conflict with the need for protecting our collective future.

As a teenager serving in the United States Navy on Tulagi and Guadalcanal, I learned first-hand in a sometimes-brutal manner how the present can overwhelm the future. We didn’t think very much about the future in those tough days, given that someone you might share rations with at breakfast might not make it past lunch.

Providing for the future in the face of immediate demands is arguably the hardest task any elected official faces. When Hugh Malone, Oral Freeman, Jay Hammond and other political leaders were maneuvering to save a fraction of the oil wealth owned by the people by establishing the Alaska Permanent Fund, the idea of saving a small portion of our collective wealth from a nonrenewable resource was bitterly contested. So was the idea that the people should obtain a share of the earnings from their savings account in the form of a Permanent Fund dividend.

Similarly, the concept of amending our Constitution to provide for limited entry in our splendid fisheries to protect the long-term viability of this rich renewable resource was slugged out in a not very genteel fashion. Still, who among us disputes the value of saving via our Permanent Fund, how the Permanent Fund dividend has lifted many citizens out of poverty and broadened the economy or the merits of protecting Alaska’s fisheries?

Which brings me to the point I believe is critical: Alaska’s financial future and whether our people will thrive instead of merely surviving is dependent on the Alaska Legislature acting to protect the Alaska Permanent Fund, including putting a halt to spending money from the existing Earnings Reserve Account.

You also need to act promptly to settle, once and for all, the annual brawl over how to appropriate funds from the Permanent Fund earnings in order to pay the dividend. It is obvious to anyone paying the slightest bit of attention the past six or so years that we are spending more than is available for government.

Borrowing funds from savings accounts like the statutory budget reserve account and the constitutional budget reserve account cannot continue. In a fiscal sense, we have been living on borrowed time and the end of the line is drawing near.

Next up in terms of spending, if we cannot control ourselves, is the race through the Earnings Reserve Account, a matter that will prove disastrous in a matter of a few years if we walk down that trail. At this point, if you are still reading this correspondence, you wouldn’t be wrong if you conclude I am nattering on and telling you something that you already know.

So, what is to be done? Creating the Alaska Permanent Fund is probably the single best accomplishment completed by our state government since statehood. It can be argued (and has been), that we should have saved more and spent less. Perhaps so. Those of us who were there at the time did the best we could and the legacy we left is what you have to work with but at least we left you with options, some of them pretty good. To be sure, we made some mistakes.

Until the Alaska Supreme Court decided otherwise, I believed with all my heart that the constitutional amendment we advanced and the people ratified setting up the Permanent Fund implicitly allowed for the dedication of a dividend from the earnings of the fund. We left the dividend formula up to the legislature based on the desire to give future legislatures some flexibility.

But nobody expected the judiciary to rule that the dividend was just another appropriation to be battled over by factions in our society. Back in the day, we really believed the Legislature would protect the Permanent Fund by protecting the dividend from being carved up and devoured by special interests and the lobbyists.

At this point, there is a loose move to change the Permanent Fund from what is essentially a trust fund into an endowment according to the Percentage of Market Value structure. This would be a fundamental shift in how the Permanent Fund is structured and nobody in the Alaska Legislature should be under the impression that adopting the POMV structure is a simple accounting move without potential to destroy the Permanent Fund.

Let me be blunt: I do not like the POMV concept. I have two reasons for not liking a shift to the POMV methodology. First, if the percentage drawn from the value of the Permanent Fund is established at or fractionally above 4%; the fund will be overdrawn at some point and enter into a downward spending spiral that will destroy the fund. If you don’t believe me, simply take counsel from the consultants to the Permanent Fund Corporation who indicated this year that drawing 5% from the fund is unsustainable.

The analysis by the consultants to the Permanent Fund Corporation conducted prudent stress tests illustrate the likelihood of systemic failure by adopting an overly generous percentage value. Secondly, the problem of how to split the POMV yield is critical.

Are you prepared to provide all eligible Alaskans with an equal share of the percentage value derived from their savings contained in the Permanent Fund in the form of a dividend?

A large majority of Alaska citizens like the Permanent Fund dividend. They use the dividend, often in creative and prudent Ways, to live and support their families and children. How many of you really believe you can cut or eliminate the dividend and not get cross-threaded with the citizens?

At this point in my life, I know I will stand with the people and oppose any move to convert the Permanent Fund from a trust account to an endowment that uses an overly generous percentage or that fails to make a fair share allocation to the citizens in the form of a dividend. If you insist on advancing the POMV concept, it seems to me that putting a 4% POMV with a 50/50 split of the percentage in order to provide for a dividend and fund government services (or whatever the legislature elects to do with the funds), is probably acceptable.

If you instead decide to throw caution to the wind by adopting an overly large percentage and then chisel off most of the funds to pay for our large state government the prospect of electoral insurrection and rejection at the polls is likely.

l’ll wind up my thoughts here by asking you to read an article that Louis Latham wrote as a young journalist fifty years ago.” Alaska was on the cusp ofexploding with oil revenue. The present in Alaska was dodgy when he wrote the article but the future looked promising, a situation that one might say has been reversed today, at least in some regards.

One of the great points made by Latham in this article is that saving a few bucks today for the future was the smart play. He didn’t characterize the present as working against future considerations the way I might have but by reading about what was transpiring in Juneau 50 years ago, you might tease out some solutions to the brutal problems you are confronted with in the moment.

I have never believed history is a circle. History in my view is a series of spirals that sometimes overlap, occasionally cross but mostly loops around in a way that gives guidance if not answers to contemporary problems. The task of political leaders in a democracy is to keep the loops and spirals on an upward trajectory.

That’s all I can ask of you – keep the future of Alaska heading up. I do not have any hard answers for any of you as you conduct the lawmaking powers for our people but I have do have a few observations that I think square with some of the observations made by Louis Latham 50 years ago about this wonderful place all of us are privileged to call home.

The yoke and burden of the present, hard as it may be, should never deflect acting in the best interest of those who will walk behind us. If you cannot summon the will and votes to address how the earnings of the Permanent Fund will be allocated that includes a fair dividend that is constitutionally guaranteed for the owners of the fund, then at least stop spending the funds in the Earning Reserve Account managed by the Alaska Permanent Fund Corporation.

We have blown through the bulk of our enormous savings accounts set aside for genuine catastrophes. For too long, we have avoided making the hard choices required to build a right-sized and sustainable budget. For years we spent too much of our communal nonrenewable mineral resources. Instead of doubling down on spending disconnected from fiscal reality, it is time to act to preserve the best idea Alaska has adopted — the Permanent Fund — and protect the fund in perpetuity by embedding a sensible Permanent Fund Dividend in the Alaska Constitution.

Do that and the other problems, demons and heartaches confronting you in the political sphere will resolve and disappear like a plate of King Crab legs at a legislative reception.

With my regards and sincerest hope that you act in the interest of our citizens, l am,

Clem Tillion lives in Halibut Cove and is one of Alaska’s resident eldest living former legislators and lifelong Republican. He is a long-time commercial fisherman, a nine-term Alaska State legislator, and is a charter member and past chairman of the North Pacific Fisheries Management Council.

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Suzanne Downing had careers in business and journalism before serving as the Director of Faith and Community-based Initiatives for Florida Gov. Jeb Bush and returning to Alaska to serve as speechwriter for Gov. Sean Parnell. Born on the Oregon coast, she moved to Alaska in 1969.

Latest comments

  • Wow, 95 but still the same great advocate for our future. Thanks Clem for calling out the revisionist judiciary and expressing our original intent.

    Alaska spends 3X what is needed on our state bureaucracy. We’re choking our businesses with needless regulatory agencies, creating counterproductive entitlements we can’t afford, and bowing down to federal overreach.

    It’s your share Alaskans! Protect your permanent fund and PFD. Elect legislators who will cut the waste.

  • Hope “they” read this and maybe listen to a bit of common sense. But that might be asking a lot.

  • WOW!

  • Fred,
    Sounds great, what program gets cut first?

  • Ah, a voice of reason from the past! We the people miss the vision you and the likes of you had. I can only pray!!

  • Move the State Capital

  • Harbor, first, Bryce Edgmon needs to be jailed. Second, stripped of his citizenship. Third, all of his communist friends ran out of the state. You have to cut out the cancer. That’s a start.

  • Thanks Clem, well said. May I suggest we enshrine the statutory formula for the PFD as a Constitutional Amendment? This should not be negotiable – it is the people’s money.

  • Every program created or expanded over the last fifteen years is fair game to be examined and potentially eliminated. When your government spending increases by several times the rate of inflation, there is room to cut.

  • Hey, anything that Stedman touches and his good ole buddies along with the governor of today, is setting up the people for failure with the PFD constitutional amendment. Since Stedman has been on the finance committee, the debt has become worse, the buddy system for millions more in the coffers of agencies is beyond belief. It is downhill for every resident of the state on the PFD. Turn over the Senate Finance committee and we may make progress. Stedman leads the committee down a primrose path of destruction year after year and its getting worse. Dunleavy bows his head and says yes to every dumb idea that moves out of that committee.

  • I remember one day shortly after she graduated from college, my daughter came to me all upset that the credit card company declined to increase her spending limit, and she would not be able to buy the new computer she so desperately wanted. I told her that in the old days, when we wanted to buy something expensive, we would save our money until we could afford it, and then we would go buy it. I’ll never forget the look in her eyes as those newly educated wheels in her head began to turn. What a novel idea!
    Thank you Mr. Tillion for your intelligent and interesting glimpse into the old days. Perhaps we are making things more difficult than we need to.

  • There’s no need to rewrite the PFD. It’s fine as it is. Whatever the rewrite ends up being, will be ignored, just like the past few years.

    It’s the Socialist, Marxist, Communist politicians and their dark money which needs to be dealt with. Too many of them have sold out to a bleak future of communism … all for 30 pieces of silver.

  • Thanks Clem for your Service to our Great Country and Our Great State of Alaska! Your words of wisdom show a genuine concern for the future of Our State and I pray our Legislators in Juneau will all read this and take your advice to heart!

  • Good job Clem. It’s funny how an outboard mechanic from Ketchikan, a land surveyor from Homer, a Bush Rat pilot from Naknek and you from Halibut Cove could work together and form such a lasting legacy for the whole State. What’s not funny is what we have before us in the Legislature today. Perhaps you might write another missive instructing those now serving in Juneau how it was that the State without oil $ could provide the same miles of Highway, Ferry Service and Better Schools. I look forward to hearing from you on this subject. One is told that the State Operating Budget is cut to the “bone”. Perhaps you have some ideas in surgical financial trimming?

  • Was just perusing the $984 BILLION “dividend” many received. I guess I am a sucker.
    If the cupboards are bare and “you gotta make payroll”( Bert Stedman equating state government with small business) you mortgage someone else’s grandkids’ house.

  • Greg Forkner, why are you fussing about the likes of Bryce Edgmon? It’s the Governor who wants to drain the Permanent Fund dry with a 5% payout. That’s what our proud senator emeritus Tillion opposes.

  • Wow Awesome Man
    95 You Rock
    Good read

  • Always a pleasure to read what Clem thinks, even though I disagree with him on the dividend, which should be ended.
    End the dividend, move the capitol and select legislators by sortition.

  • The welfare programs that were developed over the last 40 years, along with the parasites that have esconced themselves in Juneau, are the drain on the Permanent Fund, not the dividend. The very purpose of the dividend was to prevent government from plowing through every penny and the Judicial Branch shed their responsibility and allowed the complicit legislature to steal the people’s money. The legislature returned the favor by not allowing the governor to limit spending by the judicial branch. The suckups in Juneau are the problem.

  • Clem, I sat next to you on an Alaska Airline flight 35-yrs ago. Your descriptions of warfare experiences were intriguing to say the least. However, I must take exception to what I see as only pseudo-conservative accomplishments in your past.
    .
    The limited-entry fishing you helped usher in is basically a corrupt franchise on public resources. Why don’t you view the fish resource as being owned by all Alaskans the same as you do oil? Was it a mere coincidence both you and Hammond were fishermen when you established limited-entry? Why can’t I pass my hunting, business, medical, contractor, or any other license on to my son? Like you can with your limited-entry permit? How is it fair that the right to harvest a public resource (fish) is something you can pass to your family, or sell like a franchise? A fishing permit should logically revert back to the state (people) upon the death of the permit holder. The state should then auction the permit off to the highest bidder with the proceeds going back to the true owners of the resource. You, sir, helped create an abomination reminiscent of soviet-style government corruption… and you benefitted personally from it.
    .
    As to the Permanent Fund Dividend, no proper conservative would ever condone handing out free money to everyone. No one should be paid to sit around watching TV, drinking beer, and smoking dope. The money should be injected into the Alaskan economy in a manner that results in productive results. The best would be infrastructure projects that propagate into further long-lasting economic benefits. Please remember, the lifeblood of any economy is not money, but rather production. This is economics 101…. as well as conservatism 101.

    I will not allow your seniority or impressive accomplishments to prevent me from unpacking the flawed reasoning in your discourse. Be that as it may, I hereby express my deepest respect for your personage…. sir.

    • Wayne, in case you misremembered, Alaskans passed a constitutional amendment that allowed for Limited Entry. That’s why it works the way it does.

  • I happen to agree with Mr. Coogan. It is unfortunate that we ever created the dividend and abolished the income tax. Perhaps we could have suspended the tax but not abolish it. Handing out free money never ends well. And the limited entry was a solution to a very real problem but it has created its’ own issues with out of state permit holders controlling the industry. I personally kind of like the villages having permits and wish we could do some sort of allotment by years of crew time or something for the individual permits that reverted back like Wayne suggests. The wisdom of Solomon is needed for this one. But back to the dividend, Give money to those who both need and deserve it but don’t just hand it out willy nilly to everyone.. Look what that has produced. A dependent society, not a productive one.

    • The only argument the State had for keeping the Personal Income Tax was that it did give good income statistics, since the State was rolling in money at the time.
      Out of State permit holders have never and still don’t control the industry. Many out of State residents got their permits given to them because they had the points and others moved into AK due to the Boldt decision in WA that gave much of the resource to their Indians. And some Alaskans sold off their permits after receiving them, thinking Limited Entry would be determined unconstitutional. And Alaskans voted for a constitutional amendment that allowed for Limited Entry to work the way it does.
      It would surely help for AK to again get a personal income tax that could at least tax these WA fishermen that now pay no State income tax on that income.

  • Wayne Coogan, your comment about holding a franchise on a public resource is well founded and unassailable. I commend you for your logical comments here and have held the same opinion since 1977. This opinion has made me unpopular with my Fisherperson family members and discussion of such has been tabled at Holiday Dinners.
    However I dispute your comments regarding the PFD. You see Mr. Coogan since the State holds title to mineral claims, the value of these minerals belongs to us all. Therefore it is only “equitable” to share/disperse / stand and deliver the loot / my moolah not governments/ sit home smoke pot $ ,equally belongs to all Alaskans… The PFD program is the antithesis to the Limited Entry Program. I find your logic here confused and muddled.
    That said Sir, I am in agreement with you on the subject of Infrastructure Projects. Alaska will never be able to develop her vast resources without making these investments. Pity that we squandered billions on Bovine Excrement programs and not roads and bridges. Feel free to contact me if you need further education. As iron sharpens iron so one man does another.

  • Robert Schenker, saying “the permanent fund is the people’s money” is a much over-used trope. Every dollar held in custody by our government, regardless of which account its deposited, is “the people’s money.” Every dollar has the exact same value as all dollars. Any dollar used for a particular purpose is, by definition, not used for any other purpose. How much sense does it make to re-institute income taxes on one hand while handing out free money with the other? It defies common sense.

  • Wayne Coogan, the fund was created to make certain that the Government would not get all of the oil money. Part of the intent was to curb government Spending. The sums set aside in the original intent of the legislation were to save some of the vast wealth for the people and not squander it on special interest’s with powerful lobbyist in their employ. Naivety by definition is the act of believing that if we let the Political Class steal our PFD, then maybe we can trust them not to institute an Income Tax to fund their ever growing demands upon the people’s money. It’s like giving the Garbage Bear your weekly groceries in hopes that he will leave your garbage cans alone. Government like a Garbage Bear will never leave you in peace Mr. Coogan. It will never be satisfied with what it has. With all due respect to you Sir, stop believing in Unicorns and Fairy tales!
    I remain your humble servant, RAS

  • “The false dilemma fallacy is often a manipulative tool designed to polarize the audience, heroicizing one side and demonizing the other. It’s common in political discourse as a way of strong-arming the public into supporting controversial legislation or policies.”

    Income or sales tax isn’t necessary for solving Alaska’s fiscal situation. What is necessary has been stated by many Alaskan’s for decades. Nobody listens because it is counter to politics as usual, doesn’t serve the CBC, and would end the moneyed dynasties ability to keep playing the “bridges to nowhere” grift and graft game.

    It’s all the carpetbaggers woh have come up from their s***h*** states and are supporting their own kind. The monied dynasties which have been here for decades are just the “pilot fish” who encouraged their friends to come to Alaska.

    Alaska doesn’t have a money problem. We have a loosely organized RICO Act problem. The PFD was a good step forward in reducing how much of Alaska’s wealth could be funneled to the one-percenters.

  • When a government makes money (beyond that needed to regulate) from a resource, and distributes it in cash to the population, that is the definition of a socialist economy.

  • The government NEVER “makes” money ie. transforms an idea and resources into a product that can be traded for currency. That takes scientists, industrialists, businessmen, and a labour force. The government can only “take” money that has been “made” by way of taxes, fees, and tarrifs.

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