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Future of Alaska Permanent Fund plays major role in gubernatorial race

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mark begich mike dunleavy alaska governors race 2018
Alaskans will vote for
either Democrat Mark Begich, left, or Republican Mike Dunleavy
for governor on Nov. 6, which will determine what’s next for the
Alaska Permanent Fund.

U.S. Senator
Mark Begich/YouTube; KTUU-TV


  • The Alaska Permanent Fund is a $65 billion fund managed by a
    state-owned corporation and fueled by oil and gas revenues.
  • The fund was created in 1976 and began giving an annual
    dividend to every Alaskan — ranging from roughly $1,000 to $2,000
    — in 1982.
  • Current governor Bill Walker lost popularity for his decision
    to cut the dividend, and his soon-to-be-decided successor will
    determine the fate of the program.
  • This article is part of Business Insider’s ongoing series on
    Better
    Capitalism
    .

For the last 36 years, the majority of Alaskans have received an
annual check of
about $1,000 to $2,000
as part of the state’s ambitious and
unique permanent fund. And when they choose their next governor
on Nov. 6, they’ll be deciding the $65 billion fund’s fate.

While an annual, no-strings attached check from the government
sounds like it would come from the left, it was actually
developed by a Republican governor, Jay Hammond. Since then, it’s
had overwhelming bipartisan support.

Current governor and independent Bill Walker’s cuts to the
dividend were highly unpopular — this year’s dividend was $1,600
per person, but the Associated Press reported
the original payout was going to be $2,980
(that’s $6,400
versus $11,920 for a family of four). Walker backed out of his
bid for re-election in October, giving his support to Democratic
candidate former US senator Mark Begich, when all polls showed
neither had a chance against the Republican on the ballot: former
state senator Mike Dunleavy. The latest polls have Dunleavy
leading, but not by much.

Begich and Dunleavy are trying to win Alaskans’ trust during a
recession that saw the loss of thousands of oil and construction
jobs and brought the state’s unemployment rate to the highest in
the nation. An issue both candidates agree is crucial to winning
back trust in the state is how to strengthen the Alaska Permanent
Fund dividend and ensure its long-term value.

Oil money

For some background on this unusual situation: The United States
purchased Alaska from Russia in 1867, but did not adopt it as a
state until 1959. Part of being admitted as a state was the
ability to be self-reliant, and that was first accomplished by
having the highest personal income tax in the country —
self-reliance became significantly easier when the Trans-Alaska
Pipeline System was completed in 1977 and soon brought in
billions of dollars in revenue from those who pumped and shipped
the state’s freshly tapped oil reserves.

Ahead of the pipeline’s completion, Gov. Hammond decided to put
the incoming money into a fund that would strengthen the
long-term success of the young state and reduce the tax burden on
its citizens. This led to the creation of the state-owned but
otherwise independent Alaska Permanent Fund Corporation a few
years later.

The APFC would manage the fund money as a single body, but make
it accessible to the state in a corpus that could only be touched
with the voted consent of Alaskans, and the earnings reserve,
which could be adjusted as necessary with popular support from
the legislature. The state then decided in 1982 that a portion of
the reserve would be paid out each year to eligible Alaskans,
tied to the performance of the fund. Eligibility requires
registration, but there is no age limit or income restraint. That
means in a year with a $2,000 payment, a family of four receives
$8,000.

It became essential to Alaskans in all walks of life, and it may
be correlated to the state’s leading the country in lack of
income inequality. So when Gov. Walker decided that cutting the
dividend to allocate more of the fund’s earnings reserve to the
government would help during the state’s current
recession, citizens were not happy.

The two candidates looking to take his place both believe Walker
made a mistake. Begich wants to cement the dividend’s legacy in
the constitution, and Dunleavy wants to take a more hands-off
approach. Both are promising to put more money in the pockets of
Alaskans, but they disagree on how to maintain the longterm
viability of the fund and its dividend. Here are their basic
positions:

Democratic candidate Mark Begich

  • Pass an amendment to the state constitution that protects the
    dividend
  • Move $14 billion from the earnings reserve into the corpus,
    where it can’t be touched by the legislature
  • Instate a point of market value formula for the earnings
    reserve, and use half of that money for the dividend
  • The remaining money will be dedicated to public education,
    pre-K through high school

“I believe my plan is the only plan that guarantees a sustainable
PFD while also protecting the fund and its future from
politicians down the line,” Begich said on his website.

Republican candidate Mike Dunleavy

  • Walker’s cuts hurt Alaskan families and will be reversed
  • The dividend money is better spent by Alaskans than by the
    government
  • The state budget is bloated and will not be fixed by taking
    more money from the permanent fund
  • Any changes proposed to the fund or the dividend will be put
    to voters

Dunleavy thinks his more hands-off approach is the more
sustainable one. “We should leave it alone and not attempt to
‘fix it,'” he said in a statement to Business
Insider.  

Are you an Alaska resident who has received dividend payments
from the Alaska Permanent Fund? Reach out to this reporter at
[email protected]

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