SB26: ‘Diapering the Devil’ is in the details



The 2018 legislative session ended with many of us breathing a sigh of relief through clenched teeth, thankful the House Majority and Gov. Bill Walker were unable to saddle hard-working Alaskans with new taxes, but incredibly frustrated.

Once again, despite the fact that there are $18 billion in the Permanent Fund Earnings Reserve Account, the Legislature failed to pay the traditional 50/50 dividend. Three years in a row, our “leaders” have failed to give the private sector the economic stimulus it needs during this recession.

Let’s review.

In 2016, Governor Walker took $1,100 from each Alaskan with his veto pen.

Doubling down in 2017, a majority of the legislature voted to take another $1,300.

This October will see Alaskan families take a third financial gut punch. The lLegislature arbitrarily determined that every Alaskan will get $1,100 less than they should. The amount of money taken from Alaskan families and the private sector is staggering.

What’s really disturbing are the philosophical inconsistencies of those who are taking nearly $20,000 from the average Alaskan household. Republicans claim that they want small, limited government, but then vote to take money from small businesses and out of the private sector for government largess. Democrats and Independents claim to be “champions of the poor,” but continue to push the button for a de facto regressive income tax.

Alaskans have called, emailed, and testified with very little response from their elected representatives. Instead, like those former Gov. Jay Hammond warned about in his book Diapering the Devil, our politicians use the oil wealth we hold in common to curry favor and grow government.

Hammond’s hope as “Father of the PFD” was to limit the amount of wealth that politicians could waste. However, Gov. Walker and most who represent us in Juneau are bursting out of their Pampers.

As a further insult to constituents, many legislators also voted for Senate Bill 26. This new law allows the Legislature to spend a percentage of the overall value of the fund – a POMV, or percent of market value.

While celebrated by some as a way to protect the Permanent Fund and future dividends, there is absolutely nothing in this law that guarantees any protection.

Alaskans are intelligent people. We know how to read and analyze legislation, and we have discovered that SB26 is deceptive and terribly flawed. A POMV draw would create a more predictable amount of money available for dividends and government spending. However, SB26 isn’t a true POMV because it only draws from the Permanent Fund Earnings Reserve Account, not the value of both the principle and earnings. SB26 is just a statute. And based on how Walker and the Legislature have abused the traditional PFD statute, many of us are more than skeptical.

To create a real POMV, we would need to amend the constitution; something that legislative leadership and Gov. Walker know will never happen with their proposed split of 70 percent for government and 30 percent for dividends. As one member of Senate leadership put it, “The people will just vote with their pocket books.” He obviously needs a new diaper.

The truth is that SB26 doesn’t guarantee a dividend at all. SB26 does not force us to have real conversations about the proper size of government or to identify its essential functions. It only creates a new source of revenue for our legislators to tap. Forget diapers, SB26 allows the Legislature to go commando!

At the unsustainable rate Gov. Walker and our Legislature continue to spend, the PFD will soon be swallowed up by their insatiable appetite.

Sadly, with SB26, our leaders have defied the will of most Alaskans. They’ve also weakened the safeguards established to protect the Permanent Fund and Hammond’s vision of using the PFD to control government spending. Clearly, we must get active in campaigns and elect new people to represent us. Never has the following quote been more clear, “Politicians are like diapers: they should both be changed often and for the same reason.”

Todd Smoldon has taught high school economics for 20 years, resides in Willow, and has lived in Alaska for 31 years.


  1. I appreciate the author’s passion on this topic. Several additional relevant facts: All of the earnings of the Permanent Fund have always been subject to appropriation by a simple majority of the Legislature. The dividend is not expressly provided for in the Constitution. (Interestingly enough, the dividend is mentioned in language pertaining to the Constitutional budget reserve, but that language does not create the dividend.) Finally, the first Governor to advance the idea of saving a portion of Alaska’s oil wealth in a permanent account was Keith H. Miller, not Jay Hammond.

  2. Close the leak in the Constitution: Article XII, Section 8 of the Alaska Constitution
    says this: “The enumeration of specified powers in this constitution shall not be
    construed as limiting the powers of the State.” Residual power MUST return to
    the people, not to the State. Where is the protection against the State to do anything
    it pleases?

  3. Thank you, Todd Smoldon, for speaking so eloquently for all of us who’ve been testifying, sending emails, calling the legislature and writing editorials ever since the Governor declared this false crisis.

    You are right. We need tho get out the vote and stop this insanity.

  4. Todd, thank you for a clearly written article that lays out what politicians try to obfuscate.

  5. Thank you Suzanne for giving an articulate voice to what so many Alaskans feel about our very own swamp that needs to be drained. Disappointed and disgusted with this legislature and governor.

  6. Respectively disagree. Each and every Alaskan receives income off our investments. It is called a PFD. The law dictates how the income is to be split.

    When the Governor and or the legislature takes a part of the PFD it is a TAX on our investment income. The Court allows government to take our PFD and violate the law becuse Government has the power to tax.

    But all governmemt politicians/bureaucrats fear calling what it really is, A TAX on each and every childs’ and adults’ investment income called the PFD.

    Does anynother government entity tax other investment income at this TAX rate?

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