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The Alaska Permanent Fund (APF) is a constitutionally established
permanent fund In the United States, a permanent fund is one of the five governmental fund types established by GAAP. It is classified as a restricted true endowment fund for governments and non-profit organizations. Put simply, a permanent fund may be used to ...
managed by a state-owned corporation, the Alaska Permanent Fund Corporation (APFC). It was established in
Alaska Alaska ( ; russian: Аляска, Alyaska; ale, Alax̂sxax̂; ; ems, Alas'kaaq; Yup'ik: ''Alaskaq''; tli, Anáaski) is a state located in the Western United States on the northwest extremity of North America. A semi-exclave of the U.S., ...
in 1976 by Article 9, Section 15 of the Alaska State Constitution under Governor
Jay Hammond Jay Sterner Hammond (July 21, 1922 – August 2, 2005) was an American politician of the Republican Party, who served as the fourth governor of Alaska from 1974 to 1982. Hammond was born in Troy, New York and served as a Marine Corps fighter pilo ...
and Attorney General Avrum Gross. From February 1976 until April 1980, the Department of Revenue Treasury Division managed the state's Permanent Fund assets, until, in 1980, the Alaska State Legislature created the APFC. As of 2019, the fund was worth approximately $64 billion that has been funded by oil revenues and has paid out an average of approximately $1,600 annually per resident (adjusted to 2019 dollars). The main use for the fund's revenue has been to pay out the Permanent Fund Dividend (PFD), which many authors portray as the only example of a
basic income Universal basic income (UBI) is a social welfare proposal in which all citizens of a given population regularly receive an unconditional transfer payment, that is, without a means test or need to work. It would be received independently of an ...
in practice.


History

Shortly after the
oil An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturated ...
from Alaska's North Slope began flowing to market through the
Trans-Alaska Pipeline System The Trans-Alaska Pipeline System (TAPS) is an oil transportation system spanning Alaska, including the trans-Alaska crude-oil pipeline, 11 pump stations, several hundred miles of feeder pipelines, and the Valdez Marine Terminal. TAPS is one of ...
, the Permanent Fund was created by an
amendment An amendment is a formal or official change made to a law, contract, constitution, or other legal document. It is based on the verb to amend, which means to change for better. Amendments can add, remove, or update parts of these agreements. They ...
to the
Alaska Constitution The Constitution of the State of Alaska was ratified on April 4, 1956 and took effect with Alaska's admission to the United States as a U.S. state on January 3, 1959. History and background The statehood movement In the 1940s, the movement fo ...
. It was designed to be an investment where at least 25% of the oil money would be put into a dedicated fund for future generations, who would no longer have oil as a resource. This does not mean the fund is solely funded by oil revenue. The Fund includes neither property taxes on oil company property nor income tax from oil corporations, so the minimum 25% deposit is closer to 11% if those sources were also considered. ontext?/sup> The Alaska Permanent Fund sets aside a certain share of oil revenues to continue benefiting current and all future generations of Alaskans. Many citizens also believed that the legislature too quickly and too inefficiently spent the $900 million bonus the state got in 1969 after leasing out the oil fields. This belief spurred a desire to put some oil revenues out of direct political control. The Alaska Permanent Fund Corporation manages the assets of both the Permanent Fund and other state investments, but spending Fund income is up to the Legislature. The corporation is to manage for maximum prudent return, and not—as some Alaskans at first wanted—as a development bank for in-state projects. The Fund grew from an initial investment of $734,000 in 1977 to approximately $53.7 billion as of July 9, 2015. Some growth was due to good management, some to inflationary re-investment, and some via legislative decisions to deposit extra income during boom years. Each year, the fund's realized earnings are split between inflation-proofing, operating expenses, and the annual Permanent Fund Dividend. The fund is a member of the
International Forum of Sovereign Wealth Funds The International Forum of Sovereign Wealth Funds (IFSWF) is a nonprofit international group of sovereign wealth funds managers which was established in 2009. It is based in London, England. History In 2009, a group of 23 leading state-owned ...
and has therefore signed up to the
Santiago Principles The Santiago Principles or formally the Sovereign Wealth Funds: Generally Accepted Principles and Practices (GAPP) are designed as a common global set of 24 voluntary guidelines that assign best practices for the operations of Sovereign Wealth Fun ...
on best practice in managing sovereign wealth funds. The Fund's current chief investment officer is Marcus Frampton.


Alaska Permanent Fund Corporation

The Alaska Permanent Fund Corporation is a government instrumentality of the State of Alaska created to manage and invest the assets of the Alaska Permanent Fund and other funds designated by law.


Board of Trustees

The Board of Trustees are governor-appointed * William G. Moran, Chair, reappointed 2018 by Gov. Walker *Steve Rieger, Vice-Chair, reappointed 2020 by Gov. Dunleavy * Corri Feige, appointed 2018 by Gov. Dunleavy - She holds the seat designated for the Commissioner of Natural Resources * Lucinda Mahoney, appointed 2019 by Gov. Dunleavy - She holds the seat designated for the Commissioner of Revenue * Ethan Schutt, appointed 2020 by Gov. Dunleavy *Craig Richards, reappointed 2021 by Gov. Dunleavy


Permanent Fund Dividend

The Permanent Fund Dividend (PFD) is a dividend paid to Alaska residents that have lived within the state for a full calendar year (January 1 – December 31), and intend to remain an Alaska resident indefinitely. This means if residency is taken on January 2, the "calendar year" wouldn't start until next January 1. However, an individual is not eligible for a PFD for a dividend year if: :(1) they were absent from Alaska for more than 180 days, unless it was on a
allowable absence
:(2) during the qualifying year, the individual was
sentenced Sentenced was a Finnish gothic metal band that played melodic death metal in their early years. The band formed in 1989 in the town of Muhos and broke up in 2005. History Early years (1988–1991) Sentenced started in 1988 as Deformity and c ...
as a result of
conviction In law, a conviction is the verdict reached by a court of law finding a defendant guilty of a crime. The opposite of a conviction is an acquittal (that is, "not guilty"). In Scotland, there can also be a verdict of "not proven", which is co ...
in this state of a
felony A felony is traditionally considered a crime of high seriousness, whereas a misdemeanor is regarded as less serious. The term "felony" originated from English common law (from the French medieval word "félonie") to describe an offense that resul ...
; :(3) during all or part of the qualifying year, the individual was
incarcerated A prison, also known as a jail, gaol (dated, standard English, Australian, and historically in Canada), penitentiary (American English and Canadian English), detention center (or detention centre outside the US), correction center, correct ...
as a result of the conviction in this state of a ::(A) felony; or ::(B)
misdemeanor A misdemeanor (American English, spelled misdemeanour elsewhere) is any "lesser" criminal act in some common law legal systems. Misdemeanors are generally punished less severely than more serious felonies, but theoretically more so than adm ...
if the individual has been convicted of :::(i) a prior felony as defined i
AS 11.81.900
or :::(ii) two or more prior misdemeanors as defined i
AS 11.81.900
The amount of each payment is based upon a five-year average of the Permanent Fund's performance and varies widely depending on the stock market and many other factors. The PFD is calculated by the following steps: # Add fund statutory net income from the current plus the previous four fiscal years. # Multiply by 21% # Divide by 2 # Subtract prior year obligations, expenses and PFD program operations # Divide by the number of eligible applicants The lowest individual dividend payout was $331.29 in 1984 and the highest was $2,072 in 2015. However, in 2008 Governor Sarah Palin signed Senate Bill 4002 that used revenues generated from the state's natural resources and provided a one-time special payment of $1,200 to every Alaskan eligible for the PFD. Although the principal or corpus of the fund is constitutionally protected, income earned by the fund, like nearly all state income, is constitutionally defined as general fund money. The first dividend plan would have paid Alaskans $50 for each year of residency up to 20 years, but the U.S. Supreme Court in disapproved the $50 per year formula as an invidious distinction burdening interstate travel. As a result, each qualified resident now receives the same annual amount, regardless of age or years of residency. Payments from the fund are subject to federal income tax. Alaska has no state income tax, but part-year residents who leave the state may be taxed on them by their new state of residence. The PFD is a Basic Income in the form of a resource dividend. Some researchers argue, "It has helped Alaska attain the highest economic equality of any state in the United States... And, seemingly unnoticed, it has provided unconditional cash assistance to needy Alaskans at a time when most states have scaled back aid and increased conditionality."


Annual individual payout

This is the fund's history of annual individual payouts, in USD.


Constitutional Budget Reserve

The Constitutional Budget Reserve (CBR) is a companion fund to the Permanent Fund which was established in 1991 to ease problems from the variability of oil revenue, which vary depending upon the price of oil in the market. Deposits into the CBR consist of settlements of back taxes and other revenues owed to the state. Draws from the CBR into the general fund require a 3/4 vote of each house of the legislature and must be repaid. To date, the general fund has amassed a debt of approximately $4 billion to the CBR to maintain a stable level of public spending. The size of the debt owed to the CBR has raised doubts over repayment. The CBR is based on the assumption that the general fund deficit will remain constant over time (allowing paybacks to balance draws). Believing this to be mistaken, critics allege the state uses resources from the CBR to avoid reducing the budget, acknowledging debt, or increasing taxes. According to them, falling oil revenues and growing spending requirements will leave paybacks consistently lower than draws, causing the CBR to fail. Former state senator
Dave Donley Dave Donley (born August 29, 1954) is an American politician and attorney who was born in Anchorage, Alaska and served in the Alaska House of Representatives from District 11A from 1987 to 1993 and in the Alaska Senate from District J from 1993 t ...
(R-Anchorage) recognized that the high vote requirement to spend CBR money (¾ of each house) had a perverse and
unintended consequence In the social sciences, unintended consequences (sometimes unanticipated consequences or unforeseen consequences) are outcomes of a purposeful action that are not intended or foreseen. The term was popularised in the twentieth century by Ameri ...
. The high vote requirement was meant to ensure that draws from the CBR would be rare, but in fact such draws are common. Donley explained that the high vote requirement really empowers the minority party (in the 2000–07 era, the
Democratic Party Democratic Party most often refers to: *Democratic Party (United States) Democratic Party and similar terms may also refer to: Active parties Africa * Botswana Democratic Party * Democratic Party of Equatorial Guinea *Gabonese Democratic Party *De ...
), who can then get what they want in a
Christmas tree bill In the United States Congress, a Christmas tree bill is a political term referring to a bill that attracts many, often unrelated, floor amendments. A Christmas tree bill consists of many riders. The amendments which adorn the bill may provide spe ...
(presents for everyone, both majority and minority) in exchange for their votes (which minority votes would not be needed with the usual 51% voting rule). Donley thus explains why both parties can and do use the higher voting rule requirement to more frequently spend from the CBR.


Issues with the Permanent Fund


Dividends and spending

While the Permanent Fund generally generated large surpluses even after payment of the Dividend FD the state general fund operated at a substantial deficit. However, the consolidated account of both General and Permanent Funds usually shows a surplus. The Funds' ultimate uses were never clearly spelled out at its inception, leaving no current consensus over what role Fund earning should play in the current and expected state budget shortfalls. However, some people argue that the original intent was to fund state government after the temporary oil riches ceased, while others note that the Fund's intent changed from its 1976 origin when in 1982 the Dividend program began. Public opinion strongly favors the Dividend program. Indeed, in 1999, with oil prices going as low as $9 per barrel and Alaska's oil consultant Daniel Yergin forecasting low prices "for the foreseeable future", the State put an advisory vote before Alaskans, asking if government could spend "some" part of Permanent Fund earning for government purposes. Gov. Knowles, Lt. Gov. Ulmer, and many other elected officials urged a "yes" vote. Campaign spending greatly favored the "yes" side. Despite this, the public voted "no" by nearly 84%. (Oil prices rose dramatically, starting about two weeks after Yergin's prediction, to above $60 per barrel, though the quantity produced continues to fall.) Perceived support of the dividend program is so universally strong that it ensures the dividend's continuity and the protection of the Fund's principal, since any measure characterized as negatively impacting dividend payouts represents a loss to the entire populace. That is, legislators willing to appropriate the Fund's annual earnings are constrained by the high political costs of any measures leading to a decrease in the public's dividend.


Percent of Market Value (POMV) Proposal

In 2000, the APFC Board of Trustees proposed changing the Permanent Fund's management system to a
Percent of Market Value In mathematics, a percentage (from la, per centum, "by a hundred") is a number or ratio expressed as a fraction of 100. It is often denoted using the percent sign, "%", although the abbreviations "pct.", "pct" and sometimes "pc" are also us ...
(PoMV) approach which would require an amendment to the state constitution. The PoMV proposal would limit withdrawals to five percent of the fund's value each year, to be spent at the discretion of the Legislature. Currently the Legislature has authority to appropriate all of the fund's realized earnings. Tentative, unapproved proposals indicate that half of this five percent withdrawal would go to the dividend and half to government spending—but POMV died in the Legislature because most there saw POMV as unambiguously tied to such politically unpopular spending proposals. Most Alaskans (84% in 1999) disapprove of allowing the government to tamper with the fund, especially if that means government might spend Fund income. Again in 2015–2017, a POMV approach was considered. The market price for North Slope oil fell from an average $107.57 per barrel in FY2014 to $50.05 per barrel in FY2017. This price shift caused an 80 percent decline in state revenue and resulted in a multibillion-dollar budget gap. Both bodies of the legislature have passed a bill that provides for an annual draw of 5.25% of the average balance of the Permanent Fund (average of the first 5 of the last six years). Since the formula is based on an average, rather than a single year, the effective draw is only about 4.2%—enough to preserve the real value of the fund considering that the fund has returned close to 9% annually. The legislature carefully vetted this percentage over the course of two sessions and has come to a consensus. This draw is projected to produce $2.7 billion in FY2019 and grow with the balance of the Permanent Fund. The major point of disagreement, however, is the size of the dividend: The House of Representatives version of the bill uses 5.25% draw for government (33% for Dividends and 67% for government services) and an additional 0.25% draw for Permanent Fund inflation proofing. This produces $2.7 billion ($1.8 billion for government use, net of a $900.9 million dividend—about $1,250.00 per Alaskan—growing with the value of the fund). The Senate version of the bill uses the same 5.25% draw as the House, but directs only 25% of the draw to dividends. This produces the same $2.7 billion but government services receive $2.0 billion while the dividend receives just under $700 million—about $1,000.00 per person—growing with the value of the fund. Oil revenues are forecast (by the state Department of Revenue) to remain stagnant through FY2027, and traditional budget reserves may be empty by FY2019 but with a Permanent Fund value in excess of $60.0 billion, the budget gap can be reduced significantly. Since this POMV proposal does not close the gap entirely, members of the legislature are considering a tax bill as well.


Impact

A 2018 paper found that the Alaska Permanent Fund "dividend had no effect on employment, and increased part-time work by 1.8 percentage points (17 percent)... our results suggest that a universal and permanent cash transfer does not significantly decrease aggregate employment." A 2019 study found "a 14% increase in substance-abuse incidents the day after the laska Permanent Fundpayment and a 10% increase over the following four weeks. This is partially offset by a 8% decrease in property crime, with no changes in violent crimes. On an annual basis, however, changes in criminal activity from the payment are small. Estimated costs comprise a very small portion of the total payment, suggesting that crime-related concerns of a universal cash transfer program may be unwarranted."


See also

*
Asset-based egalitarianism Asset-based egalitarianism is a form of egalitarianism which theorises that equality is possible by a redistribution of resources, usually in the form of a capital grant provided at the age of majority. Names for the implementation of this theory ...
*
Basic income guarantee Universal basic income (UBI) is a social welfare proposal in which all citizens of a given population regularly receive an unconditional transfer payment, that is, without a means test or need to work. It would be received independently of an ...
*
Citizen's dividend Citizen's dividend is a proposed policy based upon the Georgist principle that the natural world is the common property of all people. It is proposed that all citizens receive regular payments (dividends) from revenue raised by leasing or taxing ...
* Permanent University Fund – funds universities in Texas from oil revenue *
The Government Pension Fund of Norway The Government Pension Fund of Norway ( no, Statens pensjonsfond) comprises two entirely separate sovereign wealth funds owned by the government of Norway. The Government Pension Fund Global, also known as the Oil Fund, was established in 1990 t ...
* '' Alaska v. Amerada Hess''


References


External links


State of Alaska - Department of Revenue - Alaska Permanent Fund Corporation

State of Alaska - Department of Revenue - Permanent Fund Dividend Division

Sovereign Wealth Fund Institute - Alaska Permanent Fund Page
{{authority control 1976 establishments in Alaska Universal basic income Economy of Alaska Energy economics Government agencies established in 1976 Legal history of Alaska Political history of Alaska Public pension funds in the United States Permanent Petroleum in Alaska