Episode 108: Permanent Fund — Past, present and future
The Permanent Fund and its interest income are the focus of this week’s Frontiers program.
Both the Senate and the House have passed plans to tap the earnings of the fund, needed to close the state’s estimated $2.5 billion budget gap, a new milestone for the legislature — but both chambers still have a long ways to go.
The fund’s earnings are not enough to do the job alone, yet the Senate has rejected the House’s plan to include an income tax—while House leaders say it will not allow a plan to go forward, which relies only on Permanent Fund earnings.
After lawmakers blew past their 121-day constitutional limit for a regular session, Governor Bill Walker called them into special session, so they have another month to fulfill their main job as a legislature – pass a budget. Another question: will they work out a long-term fix for future multi-billion dollar deficits, anticipated due to chronically low oil prices?
Amid this backdrop, we look at some of the history of the Permanent Fund’s creation in 1976 — and the decision in 1980 to do away with the income tax. In those days, Alaska was flooded with oil revenues, a scenario that led to skyrocketing growth in government spending.
Here are some of this week’s highlights:
- Critical Crossroads We turn to two finance experts for answers on how to solve the legislature’s current budget impasse – Cheryl Frasca and Eric Wohlforth. Frasca was budget director for Gov. Frank Murkowski and Mayor Dan Sullivan. Wohlforth was Revenue Commissioner under Gov. Bill Egan and a longtime Permanent Fund trustee. Both have different views on how to proceed, yet both are co-chairs of Commonwealth North’s fiscal policy study group. Here’s their most recent report.
- Alaska’s Nest Egg We go back to 1976, the year the Alaska Permanent Fund was created. Many Alaskans have come to believe that the fund was set up to be a dividend machine. Others feel it was supposed to be a rainy day account, when oil revenue ran dry. Cliff Groh of Alaska Common Ground sets the record straight.
- To tax or not to tax? Why the late Gov. Jay Hammond believed eliminating the state income tax in 1980 was one of his worst mistakes. We look back at this debate through the eyes of Clem Tillion, the lone vote in the legislature against repealing the tax.
- Featured guests: Chancy Croft and Steve Rieger Both former lawmakers have some unique perspectives on the Permanent Fund. Croft, a Democrat, was Senate President when the fund was created. Rieger, who served as a Republican in both the House and the Senate, later became a trustee for the Alaska Permanent Fund Corporation. They look at the past, present and future of the fund.
We hope this episode of Frontiers helps to provide some historical context for the debate over the use of the fund’s interest income. Even if the legislature reaches an agreement on how to tap the fund’s earnings, there’s a good chance voters will see ballot initiatives or constitutional amendments.
Perhaps this show is a reminder that the political process, both then and now, is never easy — with decisions that ripple out across the generations.