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The PFD: Where Did It Go

Written by Guest Contributor

By Asmeret Payne

So what is the Permanent Fund Dividend anyway? Everyone knows that it gives people money but what is it and why is it our money?

“At least twenty-five per cent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.”[1]

Alright but what does that mean? Basically it has nothing to do with taxes. In order to drill for minerals like gold, oil, or any other minable resource a corporation has to rent the right to mine. The understanding being that natural resources belong to everyone. The corporation in question is taking those resources so they should pay everyone especially the future generations that would not have these resources later because they are being used now. Now 25% or more of that money is placed into a special investment portfolio.

“The board shall maintain a reasonable diversification among investments unless, under the circumstances, it is clearly prudent not to do so. The board shall invest the assets of the fund in in-state investments to the extent that in-state investments are available and if the in-state investments…”[2] It goes on listing investment requirements, but you get the idea.

The amount of each payment is based upon a five-year average of the Permanent Fund’s performance and varies widely depending on the stock market and many other factors. The PFD is calculated by the following steps:[16]

  1. Add Fund Statutory Net Income from the current plus the previous four fiscal years.
  2. Multiply by 21% “ Income available for distribution equals 21 percent of the net income of the fund for the last five fiscal years, including the fiscal year just ended, but may not exceed net income of the fund for the fiscal year just ended plus the balance in the earnings reserve account described in AS 13.145 .[3]
  3. Divide by 2 “ 50 percent of the income available for distribution”4[4]
  4. Subtract prior year obligations, expenses and PFD program operations
  5. Divide by the number of eligible applicants

[1] Article IX Section 15 of Alaska State Constitution

[2] 37.13.120 (c) Alaska state statutes

[3] 37.13.140. Income.Alaska state statutes

[4] 37.13.145. Disposition of Income. Alaska state statutes

 

Which means that the check going out to each of us is half of 21% of the interest earned this year minus expenses. None of which is based off of taxes nor is it intended to provide funding for the state.

 

Last year however Gov. Bill Walker Vetoed the amount in direct violation of  “The earnings reserve account” which is established as a separate account in the fund. “Income from the fund shall be deposited by the corporation into the account as soon as it is received. Money in the account shall be invested in investments authorized under AS 37.13.120 .”[2] Gov. Bill Walker claimed that “We have been drawing down on our savings at a rate of $12 million a day. If we do not fix Alaska’s budget soon, we will have burned through the money available for future dividend checks,” Walker said. “The veto ensures the money will remain in the fund so checks will be available to future generations of Alaskans.”[3] He is also quoted as saying ““If we don’t make a change in the dividend program,” Walker said, invoking a point he has made often, “it goes away in four years.”[4] But since the PFD is based on percentages of earnings that is not possible. Part of the veto was that Gov. Bill Walker simply “crossed out the language in the budget that notes the money transfer “is authorized under AS 37.13.145(b).””[5]

“The money that’s vetoed out of the dividend goes right back into the earnings reserve,” said Rep. Dan Saddler (R-Eagle River). “And yes, there will be earnings from that, but again it does nothing to fill the actual fiscal gap that the governor is using as a pretext for cutting the dividend.”[6]

In total Gov. Bill Walker stopped more than $650 Million Dollars from reaching Alaska’s citizens.

Anchorage Democrat Sen. Bill Wielechowski is indeed suing stating that the PFD is a dedicated fund and that Gov. Bill Walker had no right to take it. The case has been taken to the Alaska Supreme Court and as of 6/21/17 has not reached a decision.

[1] PERMANENT FUND DIVIDEND DIVISION ANNUAL REPORT 2016

[2]37.13.145. Disposition of Income. Alaska State Statutes

[3]KTUU, C. M. (n.d.). $1,022: Governor Walker reveals exact amount of 2016 PFD checks. Retrieved July 18, 2017, from http://www.ktuu.com/content/news/1022-Governor-Walker-reveals-exact-amount-of-2016-PFD-394583571.html

[4] KTUU, C. M. (n.d.). $1,022: Governor Walker reveals exact amount of 2016 PFD checks. Retrieved July 18, 2017, from http://www.ktuu.com/content/news/1022-Governor-Walker-reveals-exact-amount-of-2016-PFD-394583571.html

[5] N. (2017, June 22). Supreme Court hears arguments in PFD veto lawsuit. Retrieved July 18, 2017, from http://www.alaskajournal.com/2017-06-20/supreme-court-hears-arguments-pfd-veto-lawsuit#.WW5CQoTytEY

[6] KTUU, C. M. (n.d.). $1,022: Governor Walker reveals exact amount of 2016 PFD checks. Retrieved July 18, 2017, from http://www.ktuu.com/content/news/1022-Governor-Walker-reveals-exact-amount-of-2016-PFD-394583571.html

 

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