As we all know, the ongoing debate over Permanent Fund dividends has turned into a political weapon that contributes to legislative gridlock and distracts from equally pressing political issues. Alaskans want to resolve this debate, and so do I. But to find a solution, there must be a compromise on both sides of the political spectrum.
First and foremost, we must recognize the importance of the PFD. Many families rely on the dividend to help them put food on the table, deal with the high cost of living, save for college, or start a new business. PFD is a beautifully unique resource in Alaska that increases economic activity, positive health outcomes, and opportunity statewide.
We must also recognize the importance of providing high quality essential services and investing in our infrastructure – things that make Alaska a place where our children want to stay, raise their own families, and pursue their own dreams. To do this, we must also continue to grow the permanent fund, which is now the main source of state revenue. In fact, 65.7% of state revenue last year came from Permanent Fund revenue.
As a first-time legislator, I spent much of my time working across the aisle and balancing the diverse perspectives of my colleagues, the district, and experts. I used what I learned to develop a balanced compromise in my bill, HB 260.
HB 260 protects the permanent fund, creates a realistic path to achieve a 50/50 split, gives flexibility to deliver government services while delivering a large permanent fund dividend as we follow this path to 50/50, and disarms the FPD.
Here’s how the HB 260 works: First, it preserves the Percentage of Market Value Drawdown (POMV), which is a smart and well-accepted money management rule that had been recommended for years before it was adopted in 2018. Following the POMV protects and grows the Permanent Fund by shielding it from market declines or overdrafts proposed by the executive or legislature.
Second, unlike some other proposals that call for rigid and unrealistic percentage splits between dividends and services, my proposal explicitly prescribes a shared target of 50%, but does not put us in a corner if needs change. HB 260 directs that if 50% of the POMV drawdown (combined with all other existing sources of revenue) can flat fund the previous fiscal year’s core government operations and projects, then the remaining 50% of the POMV drawdown can be assigned to the dividend. If 50% of the GVOP cannot allow us to reach a base fixed-funding budget, an additional percentage is used.
Third, to preserve flexibility and disarm the PFD, the baseline budget used for the above calculation is a 5-year moving average with a one-year lag adjusted for inflation and demographic changes. For example, the budget for fiscal year 2023 would use the average from fiscal year 2017 to fiscal year 2021. This means that if the budget is reduced, the savings cannot be applied until next year’s PFD is calculated. . On the other hand, any proposed budget increase would lead to a reduction in the DFP for the same year and gradually increase the baseline.
Together, these features discourage haphazard budget decisions to earn political points, encourage budget stability after years of decrement and volatility, and enable smart budget growth when needed and supported.
If we were to implement HB 260 today and continue to flat fund the budget, we would have a PFD of $1100 this year, and in the first five years that PFD would grow to $2800 (44% of POMV). If Alaskans want to move faster down the 50/50 split path and/or improve services, new revenue streams are an option to help us pick up the pace.
Finally, unlike some other proposals that calculate the PFD from oil revenues, the proposal here avoids pegging the PFD to a volatile index and keeps the pressure on to diversify our economy.
We all know that permanent fund protection, large individual payments that support Alaskans in their endeavors, and strong, high-quality government functions are all worthy goals. And we can all achieve them without pitting them against each other. I encourage you to remind leaders of this.
Rep. Liz Snyder represents Home District 27, East Anchorage, in the Alaska House of Representatives.
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