The PFD war isn’t going away

Just before they adjourned their 2018 session, Alaska legislators passed a bill changing the way income from Alaska’s $64 billion Permanent Fund is managed, essentially allowing the Legislature to set the amount of the annual Permanent Fund Dividend, or PFD.

This year the dividend was set at $1,600 by legislators, about $1,000 below what it would have been if a formula set out in state law were followed.

Now a group of influential Alaskans that includes two former Senate Presidents, both Republicans, are crying foul. Clem Tillion, a former Kenai Peninsula senator, and Rick Halford, who represented Chugiak, are founding members of “Defenders of the Permanent Fund.”

Tillion told the Permanent Fund’s Board of Trustees Wednesday, May 23, that his group is organizing a push for a constitutional amendment that would place the current state law setting out the method of determining the annual PFD into the state constitution along with a requirement that an “inflation proofing” injection of earnings back into the Fund’s principle be made ahead of any other distribution.

Tillion and Halford bring plenty of political horsepower to their cause. Tillion served in the Senate, as well as the state House, in the 1970s to the 1980s and was a close personal friend of the late Gov. Jay Hammond, who drove the creation of the Permanent Fund in 1976 and the PFD in 1981. Hammond died in 2005.

Halford served in the House and Senate during the same period and took a close interest in the Permanent Fund and in the early 1990s was instrumental in pushing large appropriations of surplus oil revenues into the Permanent Fund beyond the normal injection of a share of oil and gas royalties into the Fund.

Current law requires that 50 percent of the Fund’s net income, in terms of cash earnings from asset sales, rents or bond interest, be paid out in the PFDs. This year the Fund is projected to earn about $5 billion.

If the Legislature were to abide by the statute half of the $5 billion, or $2.5 billion, would be paid out, although the actual payment will be based on a 5-year rolling average. Under the Legislature’s appropriation about $1 billion, enough for a $1,600 PFD, will actually be paid later this year.

The most important goal of the constitutional amendment, Tillion said, is to require that the inflation proofing be made. Currently the Legislature must appropriate funds for inflation-proofing as well as for the PFD.

No inflation-proofing has been appropriated for the last three years although lawmakers did authorize a payment in their 2018 session.

Tillion said his group will push the Legislature to put the PFD statute in the constitution so that the 50-50 split of cash income will be required, not optional for the Legislature.

“I do worry about the Legislature because it answers to special interests,” Tillion told the Trustees. “The dividend is something that belongs to the people,” he said.

Tillion did ask the Trustees to advise his group on how the proposed Constitutional amendment should be worded so as to not create unintentional

Problems for Permanent Fund managers, such as creating pressures to sell assets to raise cash for the dividend and payments to the state general fund.

“We want your direction,” he said. “The last thing we want to do is hurt the Permanent Fund.”

He acknowledged that getting the constitutional amendment through the Legislature will be a heavy lift because an amendment requires a two-thirds vote in both the House and Senate and then goes on a ballot in the next state general election.

The soonest the question can be put on the ballot is the Alaska 2020 general election. It is too late for the November, 2018 general election.