Time to rethink Dividend?

Across Alaska, people waited eagerly on Monday to learn exactly how much they’d be getting this year from the state’s Permanent Fund Dividend program. When the announcement was made by Palmer 12-year-old Shania Sommer that the amount – $2,072 – would be a new record, social media erupted with excitement as residents eagerly discussed their plans for the money.

The fact that the amount wasn’t much of a secret (the dividend is paid out based on a publicly available formula that takes into account the fund’s earnings over the past five years) didn’t seem to matter much to anyone, and the story quickly became the most talked about of the day. For months, Alaskans have circled Oct. 1 on their calendars in eager anticipation of “Dividend Day,” an unofficial state holiday during which everyone’s bank account gets a big boost. Monday’s announcement let everyone know exactly how big of a boost that will be.

Largely lost in the excitement was the fact that Alaska’s state government is currently facing a budgetary crisis that threatens its very solvency. State officials say Alaska is running at a budget deficit of $3.5 billion, and that without new revenues Alaska will be broke within a decade. Oil revenues are rapidly declining, due to both decreased production and lower prices brought on by a glut of oil on the international market.

The Permanent Fund currently contains $51.4 billion, of which $1.33 will be paid out in checks to 644,000 eligible Alaskans. When the fund was originally created in the late 1970s, it was designed to be a piggy bank in which the state could store money for the day when oil revenues ran dry. The dividend program wasn’t created until 1982, and since then it’s doled out $23.3 billion.

Alaskans have come to cherish the dividend program, and any attempts to cut it have been met with staunch opposition. However, the time is rapidly approaching when we need to face reality.

Spending cuts alone cannot solve the state’s budget crisis. The only way Alaska can avoid running out of money is to find new sources of revenue. New natural resource development would surely help, but there’s nothing on the immediate horizon to suggest the halcyon days during which most of our expenses were paid for by oil wealth are going to return.

That means that the burden of paying for state government – things like schools, roads, public health and safety – will have to be shared by Alaska residents, just as those costs are shared by residents of other states. There’s just no way around the fact that capping or eliminating dividends could play a major role in easing the state’s fiscal crisis.

Alaskans need to realize that we’ve been incredibly lucky to have had such a long run of good fortune. Residents here pay no state income tax while simultaneously getting a large check each fall. There is no other state in the nation that has been so lucky, and many people Outside are often incredulous when they learn these facts.

It’s time for Alaskans to pay our fair share for the services we use. Combined with spending cuts, changes to the dividend program would go a long way toward ensuring a sustainable future for all Alaskans.