Alaskan utopia? Alaska's Permanent Fund Dividend

There are those who believe that Guaranteed Livable Income (GLI) is a nice idea, but an impossible dream. They don’t know Alaska.

Alaska has had a basic income program for years. Departing Governor and conservative icon Sarah Palin is a supporter of the program. During the presidential campaign last year, Palin told Sean Hannity of Fox News “What we're doing up there is returning a share of resource development dollars back to the people who own the resources. And our constitution up there mandates that as you develop resources it’s to be for the maximum benefit of the people, not the corporations, not the government, but the people of Alaska.”

In the late 1970s, Alaska established a Permanent Fund (APF) for the oil and natural resource royalties it was collecting. The principle behind the fund was that the natural resources of Alaska belonged to the people of Alaska, including future generations. All Alaskans therefore should have the right to benefit from the royalties being collected.

At the time it was created, there was no plan for the money accumulated by the fund. But by the early 1980s, a proposal was made that gained popular support: an annual dividend, paid to every resident of Alaska. Since 1982, dividend payments have been made annually to all Alaskans. There is no age or income requirement – as long as someone meets the requirements of residency, she receives a payment.

Since then, the APF dividend has become so popular that it is politically unassailable. No political party or candidate will suggest eliminating it or diminishing it.

In fact, because of the economic crisis, there was a risk that there would be no payment at all this year as there was not enough money in the fund. The legislature immediately passed a law redefining what counted as principle (which, constitutionally, cannot be spent) in order to ensure that there would be a dividend payment this year. The fund has recovered somewhat since then, but it still appears likely that this year’s dividend – as well as the next few years – will be comparatively small.

In contrast, last year’s payment was a record high $3,269, which for a family of 4 works out to $13,076. This payment was comprised of $2,069 in the regular dividend payout, plus an additional $1,200 as a one-time only energy rebate. (High gas prices mean high royalty payments for the fund, but they also mean high prices for extremely energy-dependent Alaskans.)

Very little research has been conducted on the impact of the dividend, but Scott Goldsmith, professor of economics at the University of Alaska Anchorage has done some.

Goldsmith notes that the dividend is a relatively small share of total income for the median family in Alaska, but that it still has a distributive effect by raising the bottom end of the income distribution. In fact, Alaska is 6th in the United States for income equality.

Because it is paid in a single installment, it tends to get treated as a windfall, rather than as a source of regular income. Thus, families tend to invest it in “big ticket” items rather than on every day spending. While this has helped to expand the size of the Alaskan economy, there is no sign that it has led to a diversification of the economy, which still remains heavily dependent on natural resources.

It has no noticeable impact on the labour market, either in terms of increasing unemployment or in terms of driving wages down.

There is also some evidence to suggest that the dividend serves as a population magnet, since the only requirement is residency and no other state has such a program. However, Goldsmith cautions, Alaska also has no state taxes – income or consumption – which is also a significant population draw, particularly among retirees living on a fixed income.

The evidence from Alaska demonstrates that GLI is feasible, and can be very politically popular. Alaska’s unique arrangement with oil and natural resource revenues means that its model cannot be replicated everywhere, but certainly here in Canada, where a large part of our economy is also based on natural resources, there’s no reason why a similar program could not work here.