Students discuss plan to use PFD for supporting the state budget

This article was a project by UAA JPC 201 students. Contributors include Malia Barto, Kara Viotto, Austin Michie, Mary Ryan, Suzanna Fonova and Elena Peyton Jones.

The annual Alaska Permanent Fund dividend payment was first established in 1981 to spread the benefit of oil income throughout the state to cushion the Alaskan economy. The PFD is an extra check that every Alaskan looks forward to every October.

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Photo credit: Jian Bautista

However, the state is suffering sharp declines in oil revenue, and is in a recession. Gov. Bill Walker and the state legislature have reduced the PFD by about 50 percent for the last two years. For this year, the dividend would be expected to amount to $2,700 if the traditional formula were to be applied, but the legislature may settle on $1,600.

The legislature in Juneau is considering a proposal to use earnings from the Permanent Fund to bolster the state budget. Part of it would also change the formula for the PFD, lowering the rate at which it grows. This would leave more money for investment in public services like road maintenance and education.

Would Alaskans accept a smaller PFD check to help the state budget and assure the payment for the long term at a lower level.

The opinions about this issue differ greatly.

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“I am perfectly fine with a lower dividend amount if it means that social services, education and other public agencies will have the fund they need to provide for Alaskans who need their services,” Shayne Nuesca, journalism major, said.

Lucas Wright, a UAA student, said he is willing to take the cut. He hopes that improving public services could help resolve more problems in Alaska.

“My bike had been stolen twice over two years. I’ll take no check if it means fixing the problem. I’m just sick of my bike being stolen,” Wright said.

Some students are convinced that using any money from the PFD for public services would not be beneficial for the state.

Catherine Helburg, marketing major, prefers keeping the higher dividend. She doubts that a higher state budget would lead to long-term improvements in the state’s infrastructure.

“No matter what, we’re always going to have to work on maintenance, we’re always going to work on rebuilding and fixing up things,” Helburg said.

Christian Bullard, economics major, also thinks that the PFD should not be used to bolster the state budget.

“If you distribute the money to the citizens in the form of a PFD, then it’s very likely that the state is going to retain all that money, it’s going to circulate through our Alaskan economy,” Bullard said. “If you let the state have it then it’s uncertain where that money goes. So, at that point I would just rather give it to the people, the citizens.”

Other UAA students are undecided about this question, recognizing both advantages and disadvantages.

“I don’t know. I’m really on the fence on that one. I can see the benefits of both. In the past I have relied heavily on the PFD. But I see how the state could really use the money because it is hurting,“ Hattie Schmidtkunz, civil engineering major, said.

For Anchorage resident Caleb Brown, the answer to the question depends on the purposes the extra money would be used for.

“Considering that the government can’t spend money responsibly, it’d be a hard sell,” Brown said.

What the money will be used for is an important factor in his decision. Brown said he would be more likely to give parts of his PFD for the support of public schools than for universities or infrastructure.

“The university should be a self-sustaining entity. We shouldn’t be funding them with the dividend. Road maintenance is more on the state not being able to properly spend money,” Brown said.

Matthew Berman, professor of economics, emphasizes that the reduction of the equal-amount dividend would affect some more than others, depending on personal income.

“Permanent fund dividends are more important for people with low income because they don’t have as much money. The answer to the question of how big the PFD should be based on how you feel on the income and wealth disparities [in Alaska],” Berman said.

Berman has been working in UAA’s Institute of Social and Economic Research for 37 years, and part of his research focuses on the effects of reducing poverty through the PFD.

“Poverty in Alaska was lower than it looked, but it’s going up now because Permanent Fund dividends are lower and they do materially reduce poverty,“ Berman said.