Candidates promise retroactive PFD payments, but the Permanent Fund could struggle to meet demand

Ahead of Alaska’s Aug. 18 statewide primary election, at least 31 incumbent lawmakers and challenger candidates have signed campaign promises to support a traditional Permanent Fund dividend and distribute four years of retroactive payments to Alaskans.

Those legislators and prospective legislators, mostly Republicans and Libertarians, say the dividend is an obligation of the state and is owed to the Alaskans. But figures published by the Alaska Permanent Fund Corp. indicate the fund could struggle to pay such a pledge, which would cost an estimated $4.8 billion. That’s based on analysis of legislation proposed in 2019 and 2020 by Gov. Mike Dunleavy, plus figures from the Alaska Permanent Fund Corp. this year.

While the fund contains $64.7 billion, most of that amount is either constitutionally protected or otherwise committed. According to the fund’s numbers, only $5.8 billion would be available for a payback plan.

“There has to be a recognition now that the earnings reserve account is starting to get smaller,” said Angela Rodell, CEO of the Permanent Fund Corp., referring to the spendable account within the fund.

“Alaskans need to really think about what they need,” she said.

Libertarian activist Michael Chambers organized the PFD-promise campaign, which calls for following a dividend-payment formula that remains in state law. (It hasn’t been followed since 2016.) The promise also includes retroactive payments of about $7,000 per person.

“They should pay back all the deductions, because that’s the people’s money under the law,” Chambers said.

Nearly a third of the candidates in this year’s legislative races have signed his PFD promise, and he said he expects more in the coming days.

Since 2018, the Permanent Fund has transferred money each year to the state treasury to pay for the annual dividend and the cost of state services. That transfer now accounts for almost three-quarters of the state’s expected revenue, and the Permanent Fund’s trustees have repeatedly urged the Legislature to not spend more than the transfer.

Money has already been earmarked for this year’s transfer and next year’s. The $5.8 billion, plus whatever the fund earns in the meantime, is what’s left over, and as long as it remains unspent, it acts a buffer in case of market downturns. As the buffer shrinks, the chance of immediate crisis grows.

Even without additional spending for a payback, withdrawals are greater than earnings.

Between July 1, 2019 and July 1, 2020, the fund’s value declined $1.6 billion because earnings were about 2% but the annual transfer amounted to 4.5% of the fund’s value. The decline is worse in real terms because it doesn’t account for inflation.

Democratic Sen. Bill Wielechowski is seeking re-election to his Anchorage legislative seat and was the first Democrat to sign the PFD promise.

While the Permanent Fund’s earnings have dipped recently, the fund has earned 6.44% on average over the past five years. That’s enough to keep the fund growing, Wielechowski said, particularly if voters approve a ballot measure that would increase taxes on some North Slope oil fields.

“I think when you factor in those things, you’ve got enough money in the earnings reserve to do it,” he said of the payback.

In Southeast Alaska, incumbent Sen. Bert Stedman, R-Sitka, is being opposed in the primary by Michael Sheldon, a Republican who signed the promise and staunchly advocates a payback. Stedman, chair of the Senate Finance Committee, said fulfilling the promise would require unfathomable changes to the state budget.

“If that is the road (Alaskans) decide to go down,” Stedman said of the PFD promise, “we’re going to have severe budget reductions and massive tax increases to meet the constitutional obligation of a balanced budget.”

Some payback plans also call for payments over several years, which would spread out the financial impact, but many candidates are calling for an immediate payment, in part because it would help Alaska’s economy during the current pandemic.

“A large proportion of the businesses here in Alaska have been devastated. With businesses devastated and people not getting unemployment checks, this is a perfect time to return the people’s money to its rightful owner,” Chambers said.

Roger Holland, a Republican challenging Senate President Cathy Giessel in South Anchorage, agreed with that idea. He signed a promise on July 14.

“The PFD may not go to (local) businesses, but it will for sure go to the economy and help the local economy carry itself along,” he said.

In the race for Giessel’s seat, independent candidate Care Clift signed the PFD promise, as did Democratic candidate Lynette Moreno Hinz, who faces Carl Johnson in the Democratic primary.

Giessel herself declined an interview but referred to numerous prior statements on the PFD issue. In a Tuesday email newsletter, she wrote, “I will continue to protect the Permanent Fund and the earnings reserve account from irresponsible spending. I will defend the Percent Of Market Value law, which defines reasonable PFDs as well as funding for core state services.”

That law is what defines the annual transfer to the state treasury.

In a 2019 column submitted to the Daily News, she asked whether the consequences of a large PFD would be worth the gain.

“Is the feast today worth the famine tomorrow?” she wrote.

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