Alaska’s Permanent Fund and Financial Crisis

Bill Gates, via Forbes; he still needs to wash his hair more often

Bill Gates, via Forbes; he still needs to wash his hair more often

So which is larger: Bill Gates’ net worth or the Alaska Permanent Fund?

It’s not even close. Forbes estimates Gates’ as worth $77 billion; the Alaska Permanent Fund is a more modest $52 billion. So the Alaska Permanent Fund is less than 5/7ths of a Gates. Not trivial, but not so colossal, either.

Which leads to the question, what should Alaska be doing with its stash of cash? If passing out an estimated $2,100 to each and every Alaskan really the best use of the fund in a time of statewide fiscal crisis? What if the annual permanent fund dividend were capped at $1,000.00 each? Maybe adjust the cap for inflation? Because WC is pretty sure the kinds of axe cuts the Legislature wants to make to the state budget – which cannot, you understand, cure the deficit – are a wretched alternative. Just ask Standard & Poor’s, which has warned it will downgrade that state’s bond rating – and increase the cost of borrowing money – if the state doesn’t address the problem quickly.

If we capped the PFD at $1,000, we’d save about $700 million, a good start at fixing the fiscal crisis. Certainly more than cutting staff at DMV and lengthening those lines, or and other of the chickenfeed cuts the majority caucus is talking about.

If you combined that with a 15% state income tax, which would net the state revenue from out-of-state employees as well as local, you’d get another $600 million to $1 billion in revenue.

If you add those together, it reduce the fiscal crunch by $1.3 billion to $1.7 billion.

If we combined that with a sensible reform of Alaska’s oil tax structure, we could balance the budget without using contingency funds at all. But that will have to be the subject of a different blog post.

For now, WC proposes capping the PFD at $1,000, which admittedly hits lower income folks harder than higher income citizens. But we’d balance that by a flat 15% income tax, which hits higher income folks much harder than lower income citizens. It’s not perfect, but not tax system is or ever has been perfect; it’s a mistake to delay action while searching for perfection. Or to delay action while you make fiscally meaningless cuts to the budget, maiming state service and state education.

Now all we need is a state legislature with more spine than  banana. Any ideas?


3 thoughts on “Alaska’s Permanent Fund and Financial Crisis

  1. A flat tax hits lower income people harder than it does higher income people. Sure, the take from the high incomes is more, but the pain it causes them is less than for those who make $17,000/year.
    Ideally, both the PFD and any income tax would be graduated, but that day will never come.
    Just as either the cap on Social Security yearly payments should be higher, or old millionaires shouldn’t get as much SS as do people who have much less money, but who made up to the maximum each year (now about $115,00)).

  2. I believe in a PFD cap, but unfortunately it will only hurt the lower income citizens. Having a legislature that doesn’t spend frivolously would help the budget.

  3. Damnnnn. Considering ak is a welfare state meaning they get more money from the government than it puts in; how about using the money to pay back the federal government. The money could also be used to pay back the free native healthcare. We can start there.

    Enough is enough.

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