ALASKA, USA: The Alaska Permanent Fund recovers from the financial crisis as worries continue about future revenues

On October 3, 2013, most Alaskans received their yearly dividend check—Alaska’s small, nearly unconditional, and nearly universal basic income. This year the dividend was $900, up slightly from last year’s dividend of $878, but still far below the level dividends reached at the height of the stock market bubble in 2008. Now that the fund that finances the dividend has recovered from the financial crisis of 2008-2009, dividends are like to rise over the next few years. However, the long-term future of the dividend is in danger from falling oil revenues.

 Acting Alaska Revenue Commissioner Angela Rodell announces the 2013 Permanent Fund Dividend. Sept. 18, 2013 -Loren Holmes photo from the Alaska Dispatch
Acting Alaska Revenue Commissioner Angela Rodell announces the 2013 Permanent Fund Dividend. Sept. 18, 2013 -Loren Holmes photo from the Alaska Dispatch

Every U.S. citizen who meets Alaska’s residency requirement (and fills out forms verifying their residency) receives a yearly dividend from the state government. A dividend of $900 per person, therefore, amounts to $4,500 for a family of five. The dividend is financed by the Alaska Permanent Fund, a sovereign wealth fund created out of state oil revenues in 1976. Since then, each year a small fraction of Alaska’s oil revenues have been deposited into the fund, which as grown to $48.5 billion as of December 1, 2013. The fund began paying dividends in 1982. Nearly 600,000 Alaskans received the 2013 dividend.

The fund itself is financially healthy. It has recovered all its losses from the 2008-2009 and it has grown to record high levels. But the rest of the state budget is not in such good shape. Last year the state government reduced taxes on oil companies in hopes that they would respond by producing more oil. The state has yet to see the additional drilling, but they are feeling the effects of lost revenue. Some legislators are talking now about raising taxes on individual Alaskans to make up for the revenue lost to the oil companies. With low taxes on oil and declining oil revenue, pressure could eventually amount to divert the returns of the Alaska Permanent Fund away from the Alaska Dividend toward ordinary state spending. At least some Alaskan legislators, State Senator Bill Wielechowski for example, argue for restoring taxes on the oil companies.

istockphoto via the Alaska Dispatch

istockphoto via the Alaska Dispatch

Recent articles on the Fund and Dividend include:

Senator Bill Wielechowski, “Compass: Repeal SB 21 and start real partnership with oil industry,” Anchorage Daily News, November 23, 2013.

Alex DeMarban, Bigger dividend checks likely as Permanent Fund swells $4.3 billion in 2013,” the Alaska Dispatch, September 27, 2013.

Craig Medred, “Alaska PFD: Oil wealth dividend will help federal workforce,the Alaska Dispatch, October 2, 2013.

Dermot Cole, “Forget $900. The important Alaska Permanent Fund amount is $47 billion,the Alaska Dispatch, September 18, 2013.

Jennifer Canfield, “Alaskans to receive $900 for 2013 PFD check,” Juneau Empire, September 18, 2013.

Carey Restino, “Opinion: When used thoughtfully, the annual Dividend can be far more permanent,” the Arctic Sounder, September 27, 2013.

Linda Watt, “Alaska far from ‘self-reliant’ image,” The Spectrum, Aug. 26, 2013.

Austin Baird, “Looking Back at the Permanent Fund, Looking Ahead to the PFD [Interview with Jamie Love],” KTUU-TV, August 16, 2013.

About Karl Widerquist

Karl Widerquist is a Visiting Associate Professor at Georgetown University School of Foreign Service in Qatar. He holds a Ph.D. in Political Theory from Oxford University and a Ph.D. in Economics from the City University of New York. He is coauthor of Economics for Social Workers and coeditor of the Ethics and Economics of the Basic Income Guarantee. He has contributed to journals such as Politics, Philosophy, and Economics; Political Studies; and the Eastern Economic Journal.
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2 Responses to ALASKA, USA: The Alaska Permanent Fund recovers from the financial crisis as worries continue about future revenues

  1. John Nelson says:

    Last year June 3, 2013, I sued the IRS for attempting to tax my PFD. The judge, Boeke sided with me, that the PFD was not taxable income under our constitution. Case arguments were:In 1819 in McCulloch v. Maryland, 17 U.S 316 (1819). Maryland, due to its attempt to tax the national bank, a body established by Congress. Justice Marshall, at p. 429:
    “The sovereignty of a state extends to everything which exists by its own authority, or is introduced by its permission.”
    Farrington v. Tennessee, 95 U.S. 679 (1877), where the Supreme Court recognized that in the areas within State jurisdiction, State law is supreme to that of the federal government.
    Farmers’ and Mechanics’ Bank v. Deering, 91 U.S. 29. “Yet every State has a sphere of action where the authority of the national government may not intrude. Within that domain the State is as if the union were not.”
    The 16th Amendment did not expand the scope of Congress’ power to tax (Brushaber, Stanton, Tyee, supra et al.) thus although the source of the income is no longer a factor in determining whether the tax is direct or indirect, neither the jurisdiction of the federal government nor its taxing authority was enlarged to include authority to tax activities and privileges that it could not have taxed before the 16th Amendment. Source of income, then, is still a factor in determining the scope of the taxing authority of the federal government.
    Similarly, in the 1939 Code itself, there is a clear indication that not all income is constitutionally taxable income, notwithstanding the 16th Amendment and it’s “from whatever source derived” phrase. § 115(f)(1) and (h)(2) of the 1939 Code provide:

    “(f) (1) GENERAL RULE— A distribution made by a corporation to its shareholders in its stock or a right to acquire its stock shall not be treated as a dividend to the extent that it does not constitute income to the shareholder within the meaning of the 16th Amendment to the Constitution. Also see section 61(b) of the internal revenue code where it states that if the income is unconstitutional to tax you do not have to report it on the form.
    And by Alaska statute the fund cannot be taxed within the State of Alaska ( Alaska Statutes :AS 37.13.180).

    And the last kicker is this:
    Then show that only Congress can create an agency of the United States government. And that the Supreme court could not find any organic act that created the Internal Revenue Service. See Chrysler Corp v Brown, footnote 23 which says:
    There was virtually no Washington bureaucracy created by the Act of July 1, 1862, ch. 119, 12 Stat. 432, the statute to which the present Internal Revenue Service can be traced.

  2. Mike Curnow says:

    You site a lot of old cases but fail to give us the site of your case. I would like to read Judge Boeke entire decision. Where can I find more on this?

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