Considering the question of it being immoral for the Alaska government to spend much of the Alaska Permanent Fund on government instead of the people because the legislators are lazy and stupid and simply rob the people to fund the government instead of being responsible like other states with balanced budgets, I would rejoin with this point; it is the nature of legislators to take the easy way, or the immoral way that is popular. For example consider the public debt of the U.S. government that is 100% of G.N.P. or the Chinese government’s public debt that has reached nearly 300% of G.N.P. Governments globally happily plunder for temporary gain.
One should not expect legislators to be intelligent, creative and public spirited. Instead they will vacuum the easiest revenue sources and cut the easiest as well. I asked Gemini about the Alaska sovereign wealth fund known as the P.F.D.
Gemini– Governor Jay Hammond intended the Permanent Fund Dividend (PFD) to serve as a check on government spending and ensure Alaskans shared directly in the state’s natural resource wealth. He envisioned “Alaska Inc.,” where citizens were shareholders who received annual dividends to prevent politicians from wasting oil revenue on unsustainable government growth. [1, 2]
Key aspects of Hammond’s intent included:
- Ownership & Protection: Hammond wanted to empower citizens and prevent the Legislature from treating oil wealth as a “bonus pool”. By giving Alaskans a direct stake in the fund, he believed residents would act as a “militant ring” of defenders against politicians attempting to raid it.
- “Money Wells” for Infinity: He aimed to transform finite “oil wells” into wealth that would generate revenue for generations, distributing one-half of the investment earnings to residents and using the other half for government services.
- “Alaska Inc.”: Initially, he proposed a formula based on residency duration (a flat \(\$50\) multiplied by years of residency).
- “Claw Back” Mechanism: He strongly supported pairing the dividend with a state income tax to “claw back” some of the PFD money to support public services, forcing citizens to stay engaged in fiscal policy. [1, 2, 3, 4, 5, 6, 7, 8]
Ultimately, Hammond believed the dividend was “proof that we almost did it [27]perfectly,” intending for it to be a direct transfer of wealth to citizens rather than a general fund for government spending.
The traditional, statutory formula established by the Alaska Legislature in 1982 operates as follows: [1]
- The 5-Year Average: The formula takes the net income of the Permanent Fund’s investment earnings averaged over the five most recent fiscal years.
- The 50% Split: That 5-year average is multiplied by 21% (which mathematically isolates half of the fund’s statutory net income).
- The Per-Capita Dividend: After subtracting basic administrative expenses and prior-year obligations, the remaining balance is divided equally by the number of qualified Alaskan applicants. [1, 2]
This is the exact formula that would yield a $3,800+ dividend if followed today. [1, 2]
However, since 2016, the Legislature has departed from this law by capping the payout amount during annual budget sessions. This practice was legally upheld by the Alaska Supreme Court, which ruled that the PFD formula is not constitutionally protected and is subject to the annual legislative budget process. [1, 2]
The Alaska state government has grown significantly in complexity and financial scale since Jay Hammond’s tenure as governor (1975–1982). While the number of state employees has remained relatively stable (roughly 15,000–16,000), the state’s financial structure, total spending, and reliance on investment income have changed drastically. [1, 2]
Key Growth Metrics and Shifts Since the 1980s:
- Financial Growth & Spending: State spending grew rapidly after 1979 as oil revenues flowed in, characterized as a “spending spree of unparalleled proportions”. By 2018, Alaska’s per capita spending was more than double the national average.
- The Permanent Fund Corporation: The most significant structural growth was the creation of the Alaska Permanent Fund Corporation in 1980. The fund, which began with an initial investment of $734,000 in 1977, has grown to over $86.3 billion.
- Budgetary Shifts: In 1980, the state budget was largely fueled by oil production. By 2026, the state faces a structural imbalance, with the Permanent Fund earnings (the “POMV draw”) covering significant portions of the budget, with a projected deficit of over $1.5 billion.
- Per Capita Spending: Despite population increases and periodic cuts, Alaska has consistently maintained a high level of per capita spending—between two and three times the average of other states.
- Federal Funding Dependence: While the state grew, it also became increasingly reliant on federal transfers, which totalled $5.69 billion in FY 2023. [1, 2, 3, 4, 5, 6]
The Legacy of Growth
Jay Hammond anticipated the challenges of this growth, advocating for the Permanent Fund to be a savings account to cushion against the boom-and-bust cycle. However, increased state spending and fiscal challenges, such as those in 2014, led to reduced PFD payments and reduced dependence on oil revenue, with more focus on managing the investment income from the Fund
