A rational solution for the dividend program

By
Suzanne Downing
-
36

By TOM WILLIAMS
GUEST CONTRIBUTOR

To solve the deadlock over the 2019 Permanent Fund dividend amount and the FY 2020 state education budget, the Legislature and the governor should agree to legislation during the upcoming second special session that would do four things:

  1. Modify the criteria for a Permanent Fund dividend, limiting payments to only adult Alaskan residents who are U.S. citizens eligible to vote in Alaska who have not been absent from Alaska for more than 90 days in the prior calendar year;
  2. Multiply the calculation formula for the dividend by a factor of 72 percent, the percentage of 2017 eligible applicants who would meet the new eligibility criteria;
  3. Appropriate the amount calculated under the revised eligibility formula to those 2019 applicants who qualify under the revised formula; and
  4. Repeal the “forward funding” appropriation for the 2020 education budget enacted during the 2018 legislative session and replace it with a current appropriation for the 2020 education budget from the earnings reserve account of the Permanent Fund.

This solution would:

  1. Return the dividend amount to the current statutory calculation for eligible Alaskan voters who were present in Alaska for at least three-quarters of the eligibility year, providing eligible Alaskans a “full’ dividend consistent with the original PFD program;
  2. Retain a significant vested interest for voters to protect the Permanent Fund from being raided by our politicians, an original intent of the PFD program;
  3. Avoid sending money to people who spend a significant amount of time outside of Alaska, regardless of the reason, thereby improving the likelihood that most PFD payments will be spent in the Alaskan economy where they will have the most local impact;
  4. Significantly reduce the cost of administering the PFD program;
  5. Direct the amount of the PFD’s that would have been otherwise paid to children toward the cost of their education, or other child related programs, and thereby avoid paying dividends to children while using other scarce funds to pay for their education; and
  6. Avoid a costly and time-consuming court battle over the question of forward funding programs like the education budget, while adequately funding the 2020 education budget.

So how much money paid for children’s dividends could be re-directed to their education or other children services?  Using the most recent information published by the PFD division in their 2017 Annual Report, 175,207 children were eligible for a 2017 PFD, resulting in a payout of just under $193 million at the $1,100 reduced amount.

If the $2,389 statutory amount had been paid in 2017, over $418 million would have been paid to children.  Those funds could have been directed toward funding the education budget, school bond debt reimbursement or other children’s programs.

This solution strikes a rational balance between the need for the PFD program and the need to use earnings from the Permanent Fund to help fund basic government services.

Tom Williams of Juneau is a 42-year resident of Alaska. He’s worked for aviation-related companies for the past 19 years, was director of two Department of Revenue divisions, including the Permanent Fund Dividend Division, and served on the staff of the Senate Finance and Legislative Budget and Audit committees.

36 COMMENTS

  1. Coulda, woulda, shoulda!! The above tirade is typical, especially when anyone or someone will have a committed monetary gain in life. This guy is always a wheeler and dealer for himself. Turn over the committed amount of PFD and the commitment to have that commitment put in the state constitution. The education monies will be there as always. Use the budget the governor put to the legislature and cut the monies from over-burdened programs we don’t need and slim down the “pork” from each office and department.

  2. Increasing funding to the K12 system only incentivizes and rewards bad behavior. Until we hold the K12 system accountable for results and reward positive outcomes, nothing will really improve in the K12 system. If the Alaska K12 system were an investment fund, would you put your money into it?

    • We need to address the fact that the outsiders come in to abuse the program leave Alaska and continue collecting.

      A solution would be to create a new requirement for them to be an Alaska resident for five years prior to collecting.

  3. The legislature has done NOTHING to cut spending. I could care less about their “funding woes”. Leave the PFD alone and demand the legislature DO WHAT WE ELECTED THEM TO DO.

  4. This “solution” to the PFD dilemma is nothing more than giving the PFD to only “adults” in Alaska and blow the rest. This will mean that, newly “immigrated adults” to Alaska would receive PFDs that would statutorily belong to Alaskan born “non-adults”(children/minors), and give the left overs to the “wonderful, non-accredited “education system”. Not a solution. More like another fake “redistribution” of PFD earnings that were intentionally intended for Alaskan residents (adults and minors), who qualify, no matter the stage of “adulthood”. Following the original intent of disbursement to Alaskans is the only acceptable “solution” for the PFD. Other than that, I see only another attempt at “stealing” the PFD from many of it’s rightful recipients. I don’t see why the “politicians” can’t figure a way to, basically, ignore the PFD, as previously dedicated funds, having no bearing on spending for socialist agendas. Spend what they receive as revenue, from existing sources, that have traditionally funded state government. If that’s not enough, cut spending until “spending equals revenue” (no PFD included). Spend within the means of Alaskan State revenue, not including citizens’ property (PFD). That’s not hard to comprehend. Oh, I neglected to include socialist agendas in “not hard to comprehend”. What if there was no PFD? What would the socialist/dims resort to? More taxes? More of any measure that would fleece Alaskans of their hard earned $$? They would be forced to “live within our means”. Lots of “what if’s”. Reality bites. Leave the PFD alone and do their job of administrating Alaska, within the means of revenue.

  5. How about the legislature quit listening to all the professional blowhards in the State and follow the law.
    PFD first everything else after that. That’s the only way we’ll ever cut government.

    • Right on Willy. It’s the peoples’ money, not the State’s. Legislature, read my lips, STOP TRYING TO STEAL FROM THE PEOPLE. I don’t care what some ignorant liberal judge says, the Law says use the existing formula. Pay the Dividend – first. Rest of the Budget comes after the PFD. Fill the Pipeline. We can live within our means – but not until we tell the public sector unions “NO”. We also have to do something about Walker’s medicaid expansion, and the impending State pension implosion.

  6. No, No, and No. Taking the dividend away from Alaskan children is yet another tax on the families that need the dividend most. This is an unfair idea and must not be considered. For many Alaskans the dividend creates each child’s college account and it gets spent on schools that child and their family choose. It’s probably the best investment we make in education. Let these families decide how to invest their children’s dividend.

    Spending more on K-12 is useless – it is throwing good money after bad. Alaska needs a publicly funded school system but our constitution’s drafters never anticipated the behemoth it has become. A constitutional amendment or convention overhaul to define the PFD and re-define education entitlement is the only way.

    School Choice is a much better solution. Eliminate all education funding entitlements, including the 30 – 40% we spend on a poorly performing special education entitlement for 5 – 10% of students, and give Alaskan families control of all education $$, letting them decide how to spend it. To reduce education costs and make schooling better and more relevant the state should allow businesses, school districts, and private organizations to provide quality education options. These include home school options, charter institutions, and private schools, and let Alaskan families choose. The state could appoint a commission that represents Alaska families, not educators, to set some reasonable education standards and not the progressive common core standards touted by our current money wasting educators. With a reasonable 3R test we can evaluate performance of any school receiving funds. If schools do not perform then they would lose eligibility. .

    Force the public schools to compete for funding. That’s the only way Alaskans can hold these institutions accountable. Eliminate the monopoly stranglehold educators have built.

    • Might even force ’em to stop the liberal indoctrination that seems to take precedence over the 3Rs.

  7. We’re seeing too many examples lately, of elected and other officials who simply don’t know what they’re doing.
    It re-enforces my opinion that many politicians may have a talent for getting themselves elected, but few of the skill-sets to do the job.
    If we were getting this because we deserve it, I would accept it – but we don’t deserve it. For all the individual faults, Alaska is still a wonderful state to live in.
    Next few election cycles, we need to drain our own swamp – especially of the ones who think that they don’t have to abide by the very laws which they passed.

  9. I am not going to comment, other than to note that Mr. Williams is a smart guy with decades of experience. I thank him for advancing the ideas.

  10. I could go for this (even though it would likely mean that I wouldn’t get a dividend – as I work overseas a lot). Yes, children’s dividends should go towards the cost of their education. Great concept! Does the school district waste money? You betcha, but as it is now – a childless homeowner in ANC pays 47% of their property tax to support other people’s kids – people who take their kids’ PFD and blow it. I agree in principle to the hardline for Alaska citizenship – presence, voting, adult. It’s not a perfect idea – no single one is. But the author is solution oriented and it’s a step in the right direction. The biggest thing going against Alaskans is the behemoth size of State government and that has to be cut – first and foremost, but kudos for having the stones to propose something. It’s more than we are getting from our Legislators.

  12. Under this plan, if you home school could you then receive the child’s dividend? Aside from that, some families probably choose to save the child’s dividend, or a portion of the dividend, for their future educational needs that they might not otherwise be able to afford. In the end, it seems like this entire discussion comes down to who better knows how to spend the this money. The people of Alaska or the government. If you look at dividends, like corporate dividends that people receive by investing in the stock or bond markets, the people get the money.

  13. Not a solution bc only paying adults PFDs will not hold up in court. Eligibility has already been ruled on by the Alaska Supreme court, which is why the state pays every man woman and child in the first place. They went over this very topic in the PFD working group in the legislature.

    • This comment is pregnant with legal conclusions that are not necessarily correct.

      There is room to alter the PFD eligibility criteria.. The ability to alter is not unlimited.

      Williams’s point on changing eligibility should be reviewed. Perhaps not his entire approach but in general, a look at the existing criteria for receiving a PFD should be looked at and possibly altered by the legislature.

      Thanks Tom.

  14. I’m not opposed to this kind of thinking, when it is needed. I will say that the PF was designed to keep money out of the hands of politicians who would spend it at any chance they get. We aren’t at the point that we need it. For now, let’s keep the money out of the politicians hands who want to spend it but do not need to do so.

  16. Sorry Tom you’re not as smart as you think you are. All Alaskans should benefit from the PFD . Who are you to pick winners & losers… Just give yours up that’s all you can do and be happy you did your part!

  17. Alaska needs to mandate a minimum number of students to fund a school district. There are 51 school districts in the state, 35 of which have less than 1000 students. There should be a minimum number of students for the State to fund a district. So much repetition of services for districts with 3 or 4 schools. The State would save millions. The only losers would be the overpaid district administrators.

  18. Personally I like this idea brought forward by Governor Dunleavy months ago better:
    The governor proposed having the state open up much of the land it owns for sale to residents at fair market value. Those eligible to receive permanent fund dividends could opt to forfeit their dividends to the state in lieu of outright purchase for up to 15 years at which point in time any balance remaining would be due. This would result in a fair exchange of money for raw land and would result in the state having more money available to fund a bloated government. I don’t pretend to know how many folks would participate in the program but I would venture to guess that it would be a fairly high amount.

      • Joe,
        If you are responding to my post, what gives you the idea that I, or the governor utilize marijuana? I can’t speak for Mr. Dunleavy but I do not. Please state what your issues are with the proposal rather than make what appears to be a blanket assumption. If in fact you were not replying to the suggestion regarding PFD’s used to purchase state-owned land then I extend my sincere apologies.

  19. Mr. Williams, your idea needed to be floated – and shot down. Your idea is still based on the notion that government knows how to spend our money better than we do – it doesn’t and can’t. Any taking of the PFD by the State is the most regressive tax possible. Throwing more money at education will not solve the performance problems we have with our over-priced education system, it only funds greed, inefficiency, and leftist indoctrination. I like Fed Vreeman’s education voucher idea.
    I vehemently disagree with any notion of changing the statutory PFD formula: don’t try to steal the people’s money by grabbing the PFD, and don’t try to push an income tax or State sales tax. The PFD formula needs to be enshrined in the Alaska Constitution to prevent the legislature and the courts from tampering with it.
    Reduce regulation (and regulators), fill the pipe; cut costs and increase real revenue – don’t steal from us..

  20. Lots of ideas and possible (or potential) solutions in the article as well as some of the comments I read. However, since the AK Constitution & Court makes it clear that all Alaska residents receive the PFD, that means you can’t whack the kids funding; however, instead of the full amount, how about the minors receive quarter of it and then receive the full amount of age 16? And I’m sorry, but the PFD is NOT a college fund – it is to help Alaskans get the money to help get through the winter month to help with significant heating expenses, which is for the most part is what is used for by the “day-to-day working folks” like me (or vacation funding, or paying unexpected debts like car repairs or medical expenses). There are people – like me – who do not have children! I also think that the eligibility should be tighter, say 60 days outside the state with the requirement to provide proof of living in the state of Alaska ( for example: receipts at local grocery stores, gas stations, restaurants). If people can afford a home in Alaska AND be a snowbird for several months, then you definitely do not need the PFD. How about a sliding scale when first eligible to receiving the PFD (which I believe is the way it originally started), when first eligible, you get a quarter of the PFD the first year, 50% the second year and so on. And this affects my husband & I as well as we have not received a PFD in several years, recently returned to Alaska in Sept. of 2018 so we will not be getting the PFD for a while and I would be fine with receiving a PFD on a sliding scale.

    • Sorry, Ginny, but my PFD is whatever I want it to be, whether a college fund, bill payments or donation to charity. It certainly wasn’t set up to help us get through the winter months, although that’s fine if that’s how someone chooses to spend it. But the whole point is that each individual decides how to spend their PFD, rather than the government or someone else.

    • Ginny: Where exactly in the Alaska Constitution or a court case is there support for your contention “that all Alaska residents receive the PFD”?

      It certainly is not in Art. IX, Sec.15 of the Alaska Constitution where the Permanent Fund was established.

  21. Another “rational”, crackpot scam, this one telling productive Alaskans what they “need”, how and where to spend their money, and sticking them with yet another education-industry bailout…
    .
    No, my friend, “rational” is obeying the damned law (what a concept!), paying PFD’s just like they’ve been paid for how many decades, in lieu of granting subsurface mineral rights.
    .
    May one lovingly suggest stuffing your false-choice argument of PFD’s versus “basic government services”.
    .
    Alaska’s awash in cash to pay for your overpriced “basic government services”; cash stashed safely out of taxpayers’ reach in places like the Alaska Municipal League “Investment Pool”, Alaska Housing Finance Corporation, Alaska Industrial Development and Export Authority, Alaska Energy Authority, for starters.
    .
    Nice try, my friend. May one fondly hope whatever productive Alaskans did to earn such contempt from you and your outlaw legislator friends will be a conversation topic amongst yourselves as your mob head south, way south, for permanent residence somewhere else.

  22. Appreciate you taking a stab at it, Tom, but I cannot roll with your plan. Alaska’s children, including mine, take much of their dividend and have it placed into 5 and 10 year CD’s. It will he used to pay for college one day. That is the gold standard for PFD use.

  23. I have known Tom Williams for many years and he is honest and smart, as well as hard working..
    I agree with his analyses and often thought he should he should be in the legislature.

  24. Medicaid and Medicare is rife with fraud and waste. Education is failing on all levels with six figure administrators. Mr. Williams, how is more money going to fix this? More fuel to the fire?
    STARVE GOVERNMENT NOW!

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