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Plan for giant, final dividend payment not the best answer

Posted: Sunday, February 22, 2004

To hear some Alaskans talking, one might begin to think that money really can buy happiness.

Fairbanks Rep. Jim Holm has introduced a plan for one final permanent fund dividend of $20,000 to eligible Alaskans, ending the dividend program once and for all and using what's left of the Alaska Permanent Fund about half to help support state services.

Rep. Holm has received lots of support for his proposal.

Who wouldn't want an extra $20,000 20 years of dividends rolled into one, as he described it?

Alaskans could use it to pay off their debts, buy new stuff, buy new homes for their new stuff and accumulate even more debt. The list of needs and wants is endless: reliable transportation, money for college, money for medical bills, a much needed vacation, a new boat, you name it. The giant dividend also could provide start-up capital for a new business, assistance for favorite charities, a once-in-a-lifetime opportunity perhaps to pursue a dream or two.

Alaskans also would have a chance to prove what they've been saying for years: that they can spend their money far better than government can.

How many would reinvest the money back into the state?

How many would just take the money and run? Not that it matters, the state would be better off without them, but the big payout would certainly test people's commitment and loyalty to Alaska.

Is the super-sized divided the right thing to do? Is it in the best long-term interest of the state?

No, on both counts.

The proposal appeals to our greed, our shortsightedness. While there's no doubt some families would invest it wisely and it would make a huge difference in their lives, we're highly skeptical that it would accomplish long-lasting good for most Alaskans.

The local economies of the state might experience a boom for about a year as families purchased new vehicles, new furniture, new homes, new tools, new boats, new snowmachines and such and then, we'd all be right back where we are today, except there would no longer be any chance of a yearly dividend to help boost our personal finances and the local economies.

It's unfortunate that Alaskans have come to view their yearly dividends as an entitlement. These yearly checks should be seen as a reminder of what a unique place Alaskans call home. They should remind Alaskans to be good stewards of the state's resources and to expect their elected officials to do the same.

And they should have been capped a long time ago before they ever reached $1,000.

While the dividends were intended for good, they also may be the biggest stumbling block to the state eliminating its budget gap. After all, how can the state have money problems if its citizens get free money each year in the form of an annual dividend and still do not pay any statewide sales or income tax? How is it that our schools are in crisis and our roads are deteriorating and Alaskans get an annual check from the state and don't give anything to support the state services that they demand?

It just doesn't make sense.

The best part about the dividends is they give Alaskans a vested interest in what's happening in Alaska. For that reason alone, they should never go away.

But Alaskans must get over the idea that any change in how the permanent fund is used or managed is a bad thing. They must drop the notion that they are "entitled" to a dividend preferably one that's more than $1,000. And they must face the reality that the state cannot bridge its budget gap with more cuts to state government. Rep. Dan Ogg, R-Kodiak, put it this way: "We're past the point of finding cuts, and we're into the point of dismantling."

Rep. Holm put Alaska's financial situation into perspective: "Many Alaskans tell me that they are unwilling to suffer the massive cuts required to fill the (budget) gap, nor can the money come form the Constitutional Budget Reserve for much longer. Alaska can either use various forms of taxation, the earnings of the permanent fund or the principal of the permanent fund."

Alaskans have choices lots of them. Our hope is that they will not put their short-term gain in the form of a giant, one-time dividend above the state's long-term interest.

Using part of the earnings of the permanent fund to help pay for necessary state services as the earnings of the fund were intended to be used should be a key component of any fiscal plan the state adopts.

Alaskans have tip-toed around this issue long enough. It's time to tell legislators they have permission to use permanent fund earnings to help pay for necessary state services.



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