Dan Sullivan: Another Permanent Fund plan

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By DAN SULLIVAN

As the State Legislature grapples with how to deal with the future of the Permanent Fund, I propose a solution that is a hybrid of some of the ideas that have been submitted past and present.

Two decades ago, then Sen. Jerry Mackie proposed distributing half of the Permanent Fund to the people, which would have been a significant windfall for eligible recipients and no doubt would have had a significant positive impact on the state economy during a time of low oil prices and severe stress on the state budget.

The earnings from the remaining 50% of the Fund would have been available for state government spending. This was proposed when none of the earnings had been previously used for state spending.

Currently, Sen. Natasha Von Imhof has proposed taking $6.7 billion dollars from the Fund earnings and setting up a new Permanent Fund Dividend account whose earnings would be strictly for dividends. Under her proposal, up to 5% of the earnings from the remaining $75 billion would be available for government spending.

We need to think bigger for Alaskans. I propose allocating $28 billion (about 35% of the total fund) to the new “People’s Fund,” an amount equivalent to about $40,000 per person, assuming an eligible population of 700,000 (last year approximately 670,000 Alaskans qualified for a PFD so I rounded up).  

The remaining $53 billion remains in the existing Fund and under a traditional POMV formula, up to 5% of the value can be appropriated by the Legislature

This produces about $2.65 billion for government and thus may require additional cuts to state spending for a balanced budget.  I share the belief of many that there are hundreds of millions of dollars of additional cuts that could be made to state government to achieve that balance.  Higher oil prices and increased production that we are currently experiencing will help close any gap as well.

Similar to Sen. Von Imhof’s proposal, the $28 billion People’s Fund would be invested as a separate account within the Permanent Fund.  A draw of 5 percent of the $28 billion corpus would yield $1.4 billion.  Divided by 700,000, the initial dividend would be $2,000, near the historic high. 

Just a decade ago, the Permanent Fund was worth about $41 billion.  Through wise investments and the annual deposit to the Fund from 25 percent of mineral/petroleum royalties (approximately $100 million last year), the Fund has doubled over that ten-year span.

Using the same percentage I have proposed for the two funds, 35 percent of future royalty deposits would go into the People’s Fund and 65 percent into the government fund.  Assuming the continued good stewardship of the Permanent Fund managers, we would see significant long turn growth in the principal of both funds, even with the inevitable market corrections that occur.

Here’s where it gets fun.  Channeling the Mackie Plan, eligible dividend recipients could choose to take $25,000 as a one-time payment and relinquish any claim to future dividends. While this would lower the corpus of the new fund, it would also proportionally eliminate the number of folks drawing a dividend. 

For example, if 200,000 people took the cash, that would equal $5 billion dollars.  The People’s Fund balance would now be $23 billion.  A 5 percent draw would equal $1.15 billion and divided by the remaining 500,000 eligible Alaskans, equals a dividend of $2,300. Not too bad.

Some folks planning to leave the state anyway would take the money and run. For those forced to move due to job loss or other economic reasons, this would help them get a new start.  

Others may simply prefer to make their own investments or use the money to help re-open a business shut down by government during the pandemic. Some may spend the money unwisely. Your money, your choice.

If parents decide to take the payout for the whole family, kids could have their money kept in a custodial account until they are 18.

There is no doubt that such a payout provision would be a large and timely stimulus to the Alaskan economy. 

This proposal guarantees adequate funding for government and guarantees that the dividend program is sustained.  As Governor Dunleavy has proposed with his 50/50 plan, this would need to be enacted as a Constitutional amendment requiring a vote of the people, but it would end the debate about the purpose of the Fund once and for all.

Finally, as the Governor has also proposed, a true and enforceable spending limit would also have to be enshrined in the Constitution to prevent overspending when our pockets are flush with cash. Old habits are hard to break.

I believe this proposal has something for everyone and gets us closer to what can realistically be agreed on by our elected officials.  It also properly involves the citizens of Alaska who would get to exercise their right to vote on such an important decision. 

I have been part of the chorus supporting the original statutory formula for calculating the dividend. I don’t think our laws should be so easily ignored. I merely offer this as a compromise that might get us off high center and back on the road to a sustainable future.  

What say you?

Dan Sullivan was mayor of Anchorage from 2009-2015         

29 COMMENTS

  1. Sounds to me like a windfall for the federal government when people get pushed into higher tax brackets.

  2. I say, since you asked, leave the PFD in play until after the next election.

    Living in the Bush, in a Village, I’m seeing a whole lot of discontent that I haven’t seen in decades.

    People in our Senate District S are seeing daily replays on Facebook of Senator Hoffman’s statement last year of “be happy you’re getting anything at all”.

    Or Bryce Edgmons ” we’re going to do it with or without your consent”.

    Or Tiffany Zulkoski’s ” I promise to fight for a robust PFD” 😂

    Well the people out here aren’t quite stupid enough to believe that $525 out of $3678 is anywhere near robust and it sure proves Edgemons claim, with or without we’re taking it and it damn sure, unfortunately backs up Hoffman’s, be glad you’re getting something and please forget I was the weasel that reconsidered my vote and voted for $525.

    At this point of the 160 day session, I’m all in for playing a few more hands at the table and I figure we’ll all cash in for a statutory PFD right after the next election when Western Alaska’s politicians are cashed out at the ballot box.

  3. I was on record of this same plan, except the number was 50% to the people of Alaska and allow them to vote on it, back during the election of 2020. The Alaska leadership of the Republican Party hated me for suggesting it during a KSRM debate with Rep Gary Knopp… Ron Gillham was a no show kind of like he is now crickets!? This plan has merit because it brings the 1000# gorilla in to the room. Some think the PFD will last forever…. That’s a joke especially when you have Alaska senators saying Alaskan’s are greedy and entitled. While I have had legislators say their voters were sheepole and will accept where ever he gives them. The Alaska legislature is out of touch with the Alaska spirit and understand of wha Alaskan’s want and need. Congressman Don Young once answered a question asked by then Rep Kevin Meyers. The question was… How is our permanent Fund viewed in DC congressman? Congressman Youngs answer was brief. It’s a ripe strawberry waiting to be picked…. A statement has never been more true, but it’s our special interests and legislative greed guiding the legislature to do the picking!…..

  4. Dan,
    Thank you for putting together a thoughtful proposal. Personally I would prefer to see your plan put in place but leaning a little bit more toward the original Mackie plan. Basically, place $41 billion into the People’s fund and then fund annual dividends from that. Also, sticking a little more in line with the Mackie plan, I suggest creating a tiered system for those that would like to cash out their entire dividend in a one time lump sum. I’m thinking that say 40 year residents would be eligible for 100% cash out, 30 year residents would receive 90% and so on. The idea being that a resident of 40 years would be eligible to receive the total value of their “share” out of 670,000 eligible recipients. There is little doubt that if thousands of 40-plus year residents opted for a one time payment of $61,000 the People’s fund balance would drop. However, based on the PF investment results over the last 10 years, an argument could be made that the fund would recover the cash out payment losses rather quickly.

  5. Since we are throwing ideas out there I propose the following:
    .
    (a)By October 1 of each year, the commissioner shall determine the value of each permanent fund dividend for that year by
    (1) determining the total amount available for dividend payments, which equals
    (A) the amount of income of the Alaska permanent fund transferred to the dividend fund under AS 37.13.145 (b) during the current year;
    (B) plus the unexpended and unobligated balances of prior fiscal year appropriations that lapse into the dividend fund under AS 43.23.045(d);
    (C) less the amount necessary to pay prior year dividends from the dividend fund in the current year under AS 43.23.005 (h) and under AS 43.23.055(3) and (7);
    (D) less the amount necessary to pay dividends from the dividend fund due to eligible applicants who, as determined by the department, filed for a previous year’s dividend by the filing deadline but who were not included in a previous year’s dividend computation;
    (E) less appropriations from the dividend fund during the current year, including amounts to pay costs of administering the dividend program and the hold harmless provisions of AS 43.23.075 ;
    (2) determining the number of individuals eligible to receive a dividend payment for the current year and the number of estates and successors eligible to receive a dividend payment for the current year under AS 43.23.005 (h); and
    (3) dividing the amount determined under (1) of this subsection by the amount determined under (2) of this subsection.
    .
    Of course this is already the statute language for the PFD that isn’t being followed, so how’s about we just start following it? The state can already take 50% of the earnings instead of depositing it back into the corpus, why not try it for a few years and see what happens instead of seizing half or more of the legal dividend from every Alaskan man, woman, and child? Instead of reinventing the wheel, lets try and use the wheel we’ve already built and been riding on for decades.
    .
    What say you?

  6. Compromise is the death of virtue.

    We liked it just fine the old way, our dividend is our share of the subsurface resource wealth of Alaska, the best way to let the people choose is to give them the money.

  7. I think I saw you working at a carnival, having people guess which shell the pea was under.
    Shouldn’t you be doing damage control somewhere?

  8. I say: you let Lisa win by pulling out of the race at the last minute. So we ended up with another 6 years of Alaska’s version of Cruella deVil. Thanks for nothing, and don’t ever do that again.

  9. That’s not solving the problem, which is to get spending under control. What happens when State Legislatures blow through their end. Future legislatures eventually going to hit up the people’s other half just to avoid the inevitable.

  10. 50/50 or bust,
    no shortchanging the people’s fund deposits to emasculate the people’s fund, no cash payouts.
    Put it in the Constitution!
    Neither this, the Governor’s proposal, http: slash slash www dot akleg dot gov/basis/Bill/Text/32?Hsid=SJR006A nor the current version from the legislature, http: slash slash www dot akleg dot gov/basis/Bill/Text/32?Hsid=SJR006B specifically protect any portion of the “Permanent Fund” from spending. There is no concept of “protected corpus” in either proposal and there is no inflation proofing. For me, these are fatal flaws and I would not vote for either should it come before the voters for final approval.

    I would suggest a total splitting of the fund to create two new and separate funds, “The Alaska Government Funding Permanent Fund and “The Alaska Peoples’ Permanent Dividend Fund.” Here’s how to do it – first blush draft:

    Split the existing nearly $80 billion Permanent Fund 50/50:

    One half becomes the initial protected corpus of a new “Alaska Government Funding Permanent Fund,” with earnings available for required inflation proofing of the protected corpus and government operations and/or addition to the protected corpus subject to Legislative appropriation;

    The other half becomes the initial protected corpus of a new “Alaska People’s Permanent Dividend Fund,” with earnings available for required inflation proofing of the protected corpus and annual distribution as Permanent Fund Dividends (PFD) to qualifying applicants w/o need for Legislative appropriation. The resultant annual PFD may only be reduced by proposal initiated by the people or the legislature and ratified by vote of the people in a general election. Any such PFD reduction proposal shall include compensating deposit of the balance of the funds available for distribution into the protected part of the Alaska People’s Dividend Fund.

    The initial ~$40 billion seed amount in each fund along with any future additions (the respective “Corpus of the Fund”) is to be “permanent” just as the Constitutionally protected part of the current PF is today. No portion of either “Corpus” may be extracted for any use by Legislative of Executive action. Amounts now Constitutionally designated for annual deposits to the current PF (Resource revenues) shall be split 50/50 between the two new funds and will be deposited in the respective protected parts.

    As it is certain annual fluctuations in earnings will occur, a smoothing scheme, such as the original permanent fund five year moving average of earnings or current percent of market value (POMV) scheme could be applied to ameliorate those effects.

    Cast the two Funds separately into the Alaska Constitution to ensure perpetuity and to unburden the legislature and people of the trauma of the annual squabbling they have been enduring since Governor Walker grabbed the first chunk of Dividends.

    Jere

  11. No, this Sullivan who helped get Murkowski in office last time is just another traitor. Why should the people only get 35 percent? And the swamp gets 65 percent. I call BS! There is more of us than them!

  12. It’s the People’s money Dan, not the State’s. No compromise, follow the law – which has worked very well until a few libs decided they wanted to spend more than the State was taking in and the State supreme court decided it was an appropriation giving the legislature all the excuse they needed to steal it. Cut the budget – real cuts, which will hurt – and fill the pipeline. We have 200 years worth of oil. We need a lawsuit to force the feds to live up to the Statehood Compact. And we need to rein in the public sector unions – and cut some superfluous positions and programs. Rescind Walker’s medicaid expansion for starters – we warned congress about it then that it was not affordable… We just have too much government. We can balance the budget and pay the statutory dividend without rewarding princess Natasha’s hissy fit. IF we let them, they will take all of it. Let the people decide. My two-cent rant’s worth… and I promise not to sling what’s left of my hair around…

  13. “………What say you?”
    I say that it’s a tragedy that any pile of money anywhere attracts scumbags like garbage attracts flies and aggressive bears. It appears that the ONLY solution is to waste all of it forever so the scumbags leave in pursuit of money elsewhere. It’s so sad………

  14. We don’t need any “new” plans for the PFD. The original formula was working fine until the meatheads in the Legislature started fiddling with it!

  15. I like it! What a novel idea; Doing what has already been vetted, approved and legislated, then sticking with it. Why are we always up for reinventing the wheel? This one rolls pretty good when steered in the right direction, legislative obstacles are removed or avoided and we hit a green light at every intersection. It only falls off the track when the legislature is in session.

  16. If it’s the “people’s money” why don’t the people have more say in its distribution? Some will say the PFD amounts to a social program. I would ask this question; Is a family saving money for their children’s education a social program? Neither is the PFD, rather it’s a delivery on a promise to manage the resources of this state, which belong to the people of this state, by paying them from the profits earned by their sale and use. Neither the governor, nor the legislature has the right to alter this process. They have managed to manipulate the law and the existing constitution of the state to alter the original intent. As for Dan’s new “proposal,” leaving a known quantity in the slush fund for appropriation of the legislature would become a starting place for them to begin new spending; they can’t help themselves, it’s in a politicians DNA. Leave them in Juneau, cancel all flights in an out of Juneau until they produce a budget with teeth, not talk.

  17. Love you Dan
    But it’s already a LAW to get more money from OUR, PFD. Without making changes.
    Who said they will not raid the new voted on fund, by making it ANOTHER PFD LAW. They will, just take what they want. Soooo wrong, all of these legislators should be in Jail. That’s stealing you go to jail for that, Right.

    What’s wrong with this Picture $525, your $2000, or the existing Law payment of the PFD a full Amount of over $3000
    The math does not add up, in MY checking account

  18. Dan
    So I’ve lived and worked in this state before the Pfd was created.
    So now we get a nice reward the last three years, from are saving account. Then the bank/government said, sorry we just don’t think you can handle taking out YOUR own money and spending it the way you see fit.
    We KNOW Better then you. So shut up, we’ll give you pennies on the dollar of Your money. So go back to your corner and be quiet.
    People of Alaska WE need to make Noise about this STEALING of Our PFD/money

  19. What do I say? The state government is broken and corrupt beyond repair. If we had an FBI worth a damn the entire legislature should be under federal investigation.

    They are all corrupt thieves and should be in prison. And under IRS investigation.

    I oppose anything that does not tie the legislatures hands with threat of prison if they wander. Regardless of if it benefits me or not.

    It’s a sad commentary when our political class says the best we can do is surrender because they have no intention of ever following the law.

    What say me? Not just no, F no.

  20. Why should the people compromise so that greedy politicians can continue to spend beyond their means? Let’s stick to the ORIGINAL AND LEGAL plan that worked for so many years before politicians went crazy with ridiculous programs that benefit only those who run them? Most Alaskans are grateful for their share of the wealth and will put that money back into the struggling economy or save it for a rainy day. The Gov’t. does not know the meaning of frugal. How about those legislature salaries? Shocking, huh? But they made certain that they got paid, even though they didn’t complete the job.

  21. I say, I agree with Steve-O and others on this that we should leave the system the way it is, with one exception. It must be written into the Alaska Constitution.
    Justice Daniel Winfree of the Alaska Supreme Court himself offered us guidance on this when the statutory ruling (aka loophole) was made that started this whole mess. He wrote that unless a new constitutional amendment is ratified, “the Permanent Fund dividend program must compete for annual legislative funding just as other state programs.”
    Thus far, 100% of the time, I have voted NAY on any change to the Alaska Constitution, for any reason. I have viewed the Constitution as the gold standard, home base, set in stone, law of the land. I believe that in this case, elevating the original PFD formula to Constitutional Amendment status not only aligns with the Founders’ original intent, but also prevents future squabbles, percieved “theft by statute”, and requires a more disciplined approach when it comes to the annual budget.
    As for the lump sum payout, it sounds good on paper, but I can only imagine how that could cause the people to turn on each other, as sour doughs vs. chichacos debate who is more deserving of what arbitrarily chosen amount.
    .
    Preamble
    “We the people of Alaska, grateful to God and to those who founded our nation and pioneered this great land, in order to secure and transmit to succeeding generations our heritage of political, civil, and religious liberty within the Union of States, do ordain and establish this constitution for the State of Alaska.”

  22. As I stated at the end of the article, I favor the original statutory dividend, however not enough of our elected officials agree. I appreciate the House Minority holding firm – the next few days of the special session will be interesting. Mr. Troy – Cheechakos.

  23. AK/Mr. Trout – Folks concerned about federal taxes on the payout option would certainly have to take that into consideration when making their decision.

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