AJOC EDITORIAL: $1,000 is nothing to sneeze at

Only in Alaska could a guaranteed $1,000 to every man, woman and child be considered a rip-off.

Only in Alaska could such an unrealistic attitude take hold fueled by widespread expectations that everything should be paid for by the federal government funded by U.S. taxpayers and the state government funded almost entirely by a single industry.

Those who have opined that the Permanent Fund Dividend has created an unhealthy sense of entitlement among Alaskans have been proven more right than wrong over the past couple days as the howls of “raids” on the Fund and claims of outright stealing from people’s back pockets emanate from internet cowboys’ (and girls’) keyboards and legislators from both parties.

For a state filled with people who endlessly espouse the refrain of “it’s our oil!” it’s a small wonder that in the 39 years of oil flowing through the Trans-Alaska Pipeline System many have not bothered to think about what being an owner state means.

Owning the oil means owning the risk. If some Alaskans don’t want to ever feel the brunt of commodity price cycles then they should quit saying “it’s our oil!” and say what they really mean about the treasuries of the companies who produce it: “it’s our money!”

That’s what it looks like when the state constantly moves the tax levers to take in more at high prices and then take in more at low prices as if the oil companies are nothing more than a money printing press for the government.

The attitude of these Alaskans, reflected by a majority of the House and Gov. Bill Walker, are downright Venezuelan.

To put things in perspective, ExxonMobil finished 2015 with $3.7 billion in cash on hand. Even if the state could seize it all Hugo Chavez-style, it wouldn’t cover this year’s deficit. ConocoPhillips, the state’s largest oil producer, finished 2015 with $2.3 billion in cash on hand. That would cover a little more than half of next year’s deficit.

The state, meanwhile, has nearly $54 billion in the Permanent Fund and nearly another $8 billion in the Constitutional Budget Reserve. It will take in more than $1.1 billion this fiscal year from the oil industry despite the fact the producers spent a good chunk of this year losing money on every barrel.

Since the Swanson River discovery in 1957, the state has taken in nearly $116 billion in unrestricted petroleum income and has paid out more than $21 billion in dividends since 1982. But to hear the loudest voices tell it, we’re getting hosed by the oil companies.

You’ll never hear them talk about the 10 Democrats who controlled the Senate from 2006-12 and passed bloated budget after bloated budget and approved ever-escalating government union contracts that have raised the state payroll to some $1.4 billion.

Yes, Republicans controlled the House back then as they do now, but maybe someday the Democrats will be called to account for their spending habits as well, which included billions of dollars in tax credits under ACES that dwarfed PFD distributions in several years while production continued declining by 6 percent per year.

And what has the state done with that money? Alaska still has some of the worst education and health outcomes in the nation.Its state employees get generous raises every year for achieving nothing more than an “acceptable” review on their performance, if they’re evaluated at all.

The damage that will be done to the state from loss of oil production and loss of jobs will far outweigh the damage from distributing the historical average from the Permanent Fund as the Senate voted to do.

Media reports and Democrat talking points are that the PFD has been “halved” under this bill. Cutting it to $1,000 from a projected $2,000 is indeed cutting it by half.

It would also be accurate to say that the PFD has been capped for the next three years near the historic average of $1,089 per Alaskan. The average total distribution since 1982 has been $621 million compared to the $700 million that will be sent out this year.

To put it bluntly, the idea of spending $1.4 billion on PFD checks in the midst of a $4 billion deficit is insane, and those who advocate for the PFD being the No. 1 spending priority for the state are irresponsible.

The PFD was less than $1,000 in 2004, 2005, 2012 and 2013. It was less than $1,200 in 2003, 2006 and 2011.

In other words, the 2016 dividend will still be roughly equal to seven of the last 13 years even after being “cut in half.”

The sky didn’t fall then, and it’s not going to fall now from a PFD reduced from an all-time high to its historic average at a time of historic deficits. Anyone saying different is probably trying to get elected.

Andrew Jensen can be reached at andrew.jensen@alaskajournal.com.

Updated: 
06/08/2016 - 3:25pm

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