We The People: How did Alaska get its Permanent Fund and Permanent Fund Dividends?

ANCHORAGE, Alaska (KTUU) - As Alaskans get ready to receive their Permanent Fund Dividend, you may not know why or how it came into existence, and that’s the topic of this month’s “We the People.”

Just a few decades after Alaska joined the United States, and the completion of the Trans-Alaska Pipeline System, the state found itself flush with cash and was faced with the question of what to do with it.

”The state was poor, and there was a debate then about ‘should we save a portion of this money, or should we invest it in sorely needed services?’ The decision was made to invest it in services,” said David Ramseur, Alaska Historical Society president.

As discussions of how exactly to use this newfound wealth progressed, many propositions were made.

”One of the ideas was ‘Let’s use some of the money to bail out Chrysler, we have so much money,” Ramseur said.

While many ideas were thrown around, Gov. Jay Hammond wanted to make sure that money could benefit Alaskans for generations. Cliff Groh worked alongside legislators at the time of the creation of the Permanent Fund and recounted working with Hammond.

”He was very concerned that the state of Alaska would essentially use all the money that came in from the oil wealth in one generation, and that most of the benefits of that oil wealth would go to people who were tending to be richer [and] more politically connected,” Groh explained.

The idea was to set aside a portion of the money for future generations by a Constitutional Amendment put before the voters in 1976.

”They have the amendment, set aside roughly 25% of the oil revenues coming to the state, and Alaskans overwhelmingly approved the creation of the permanent fund,” Ramseur said.

This did not create the PFD we know today; this created the savings account, which can exist separately from the dividend checks Alaskans see every year. The first push to create the dividends started two years after voters approved the Constitutional Amendment.

”There was another attempt to create permanent fund dividends in 1980, two years before they were actually created,” Groh explained.

The first attempt was to allow the dividends based on a “durational residency basis.”

”The best way to say it is, under the original plan, one person could get dividends, an amount of dividends, 21 times as large as someone living next door, depending on when they received, when they arrived in the state and started their residency,” Groh said.

That plan was sued, and while it had its day at the 19th-century Supreme Court, the Alaska legislature went to work on a backup plan in the event the original plan was found unconstitutional.

”In June of 1982, those things happened. The legislature passed the backstop plan just as the end of the session in the first week of June of 1982, and then later that month, the United States Supreme Court issued its decision that struck down the original plan,” Groh said.

Now, as Alaskans get ready to enjoy their yearly dividend, Groh and Ramseur encourage you to think about the legacy Jay Hammond and the Permanent Fund have had on not only Alaska, but the international community as well.

”Once Alaska created the Permanent Fund, a number of other states and countries followed suit. The best example is Norway, which created their own wealth fund,” Ramseur explained.

”There were a couple of Russian regions that suddenly had resource wealth, and they wanted to use Alaska’s model to create a permanent fund. So, there is a lot of national and international interest in Alaska’s model for saving some of its oil wealth.”

”The permanent fund dividend would never have existed without Gov. Hammond, who really pushed for it,” Groh concluded.

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