Brennan: Hammond had it right

By Tom Brennan

Jay Hammond’s idea for a Permanent Fund dividend is having an important impact on state spending.

The dividend, and finding ways to pay it, is creating pressure on Alaska’s elected state officials to keep spending on state agencies and projects down. 

The state is still sending out individual dividend checks of roughly $1,600, but the approved formula would actually mean checks double that size. Fortunately cooler heads have prevailed and the Legislature has been keeping the payments down to prevent overdrawing from Permanent Fund reserve funds.

It’s an interesting dynamic and seems appropriate for the situation we are in. I’m not sure Hammond, Alaska’s governor from 1974 to 1982 and the guy who got the Permanent Fund established in 1976, foresaw that would happen. But perhaps we should give him the benefit of the doubt and assume that was just what he had in mind.

Momentum for establishing the Permanent Fund began after the Legislature blew through the $900 million taken in from the 1969 oil lease sale with lightning speed.  That prompted civic leaders like Anchorage Times Publisher Bob Atwood to urge creating a fund in which we could sock a portion of future oil revenues to fund government in lean times.

Hammond took that up as one of his major goals — and he succeeded admirably. The dividend seemed an afterthought, but his advisors like Clem Tillion said Hammond had it in mind from the beginning, but delayed unveiling it in the early campaign, presumably for tactical reasons.

The fund, which now stands at just short of $67 billion, receives 25 percent of the state’s oil royalties and that money is invested. The fund is well-managed and its investments are a major source of its revenues.

With oil revenues down due to declining throughput in the trans-Alaska pipeline and sinking oil prices, the fund’s $67 billion represents a tremendously valuable nest egg. It is currently a major source of funding for state operations as well as those lovely dividend checks.

Our state leaders are being coy about their plans for this year’s dividend checks. It seems unlikely that the approved formula will be followed since that would require dipping rather deeply into the fund’s earnings reserve. The total checks would be something north of $3,000, but most of us would settle for anything resembling half of that.

My wife and I had dinner the other night with a couple from Seattle. The guy knew that Alaska did away with its income tax in 1980 and that the state pays every person who has lived here for a year or more a dividend. He kept shaking his head at the thought. 

Alaska is the only state where such a situation exists and it is a matter of pride for most of us. But one can’t help but feel a little guilty when explaining it to visitors.

And I must admit that it’s time for me to recognize that Jay Hammond’s vision was a good one and surprisingly accurate.

So with the power vested in me as an English major, I hereby declare and recognize that Gov. Jay Hammond was right all along. And the financial support Alaska has now during lean times is just what he had in mind back then.

4 Responses to Brennan: Hammond had it right

  1. John London February 9, 2020 at 10:12 am

    The wealthy here will do anything to not have to pay taxes as they would lose more than the average Alaskan citizen gets in the permanent fund.

    That is why every year on here some joker will rant about how he does not take the PFD.

    The fund is getting studied by forces with a little more on the ball than Alaskan politicians as we approach a guaranteed income like it or not partly due to automation of the work place.

    There is a video on Netflix I believe called American Factory with Chinese words under the title. The show is about wage slave drivers from China coming here to take over a auto glass factory in the 48.

    The China representatives could not understand how American workers would not work a low paid 12 hours day like China Slaves and were “lazy” according to the representatives.

    At the end of the show the China factory representatives threw up their hands and installed robot workers.

    The guy from Seattle can shake his head all he wants and then face reality.

    Reply
  2. Chris Nyman February 9, 2020 at 12:52 pm

    Although I agree the Dividend does put pressure on the Legislature to hold down spending, the reverse is also true: The stated needs by the electorate for government services holds down the Dividend. This was demonstrated by the outcry last year after Governor Dunleavy attempted to impose massive cuts to spending.
    This is as it should be – the debate from here on out is Government services versus the Dividend. New taxes are unnecessary and counterproductive until either the size of government is reduced or the Dividend is ended (which I support because we have been robbing from the CBR to pay for an undeserved and unsustainable Dividend).
    Which brings me to the supposed “$1.5 Billion deficit” this year. This is total BS because it is based on a $3200 Dividend. In fact, we would have a budget surplus of $600 million without the Dividend or an $800Dividend with a balanced budget.
    Enough of this Hammond idolatry – he was as flawed in his thinking as every other politician. One wonders what he would think today after 40 years of the Dividend and the oil money running out.

    Reply
  3. Bruce Brunsvold February 9, 2020 at 8:42 pm

    Alaska spends multiple time more per capita on government than similar states and has a serious spending problem. Dunleavy and many of our elected reps recognize this. To continue to pay for a bloated bureaucracy and to fund this from money rightfully meant to fund the dividend would not please Gov. Hammond I believe.
    I think your views reflect those that got us where we’re at by abandoning responsible spending discipline.

    Reply
  4. Elizabeth February 11, 2020 at 8:07 am

    I agree mostly. I also believe our legislators need to go back to a high school personal finance class and learn how to balance a simple household budget, which should actually b a precursor to running for office. I have no problem using the permanent fund as Mr. Hammond intended, but there is an accountability problem in Juneau, and our state budget is too big. I am not on board with giving our legislators a nickel more until they can prove they live within our already generous means. We are not in an income crisis yet but we are in a spending crisis.

    Reply

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