The Alaska Permanent Fund, feat. Sen. Bill Wielechowski

It’s easy to forget that one U.S. state administers a universal cash dividend and has for over thirty years. Alaska came into a windfall from leasing its oil lands in the late seventies and early eighties, and made the bold decision to invest the revenue in a sovereign wealth fund, which provides cash dividends to every Alaskan on an annual basis. Alaska State Sen. Bill Wielechowski joins the podcast to discuss the past, present and future of the Alaska Permanent Fund, and if it could be a model for the entire country.

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Episode Transcript

Owen: Hello, and welcome to the Basic Income Podcast. I’m Owen Poindexter.

Jim: And I’m Jim Pugh. We have many, many times on this podcast brought up the Alaska Permanent Fund as really the only existing example of government-run universal income that exists today, certainly in the US and it seems to a large degree around the world, where people there, everyone in the state is getting this check every year that came from the oil money there.

But we haven’t ever really dived in deeply on what are all the dynamics that actually come into play with that? How does that work, and how did it come to be?

Owen: To delve into that, I got to speak with Alaska State Senator Bill Wielechowski, who is a big proponent of the fund and gave us an on-the-ground book on what’s going on in Alaska.

Jim: Here’s Owen’s interview with Senator Bill Wielechowski.

Owen: Senator Wielechowski, thank you for joining us on the podcast.

Senator Wielechowski: Thank you for having me.

Owen: Many of our listeners are familiar with the Alaska Permanent Fund, but just to ground us, would you describe the fund and how it works?

Senator Wielechowski: Yes, the Alaska Permanent Fund was set up in 1982. What had happened was, several years before that, we had discovered oil in Alaska in Prudhoe Bay. The state of Alaska got $900 million for the royalties from leasing that out. This was at a time when our annual state budget was around $125 million. They had spent all that $900 million within about six years.

The people of Alaska were frustrated, and they wanted to be able to put some away, and they wanted to be able to make sure that some of it went to everyday ordinary Alaskans because a lot of that money went to big special interests. It went to people who were politically connected. They created the Alaska Permanent Fund, and they put in 25% of all the royalty money that we get for our oil and gas. We have a tremendous amount of oil and gas in Alaska.

This is something that’s unique about Alaska compared to every other state in the country. We’re the only state in the country where the state actually owns subsurface rights. We actually own the oil and gas as opposed to a private landowner in say Texas, North Dakota, or California where if you happen to own a land, you’re a farmer, rancher, and you shoot and hit the ground and oil shoots up, you actually, the private landowner, own that oil. In Alaska, that belongs to the state, and it belongs collectively to everyone.

What better way to share that resource wealth than to pay it out in a dividend to every single Alaskan? That’s exactly what we do. Every man, woman, and child who is a resident of the state of Alaska — you have to be a resident for one full calendar year — you’re eligible for a Permanent Fund Dividend. It’s been as high as about $3,200 several years ago. This year, it’s projected to be about $1,600 per person. For a family of four, it’s a significant amount of income.

It’s done some really tremendous things in Alaska. We have the lowest income inequality in the United States, in large part because of the Permanent Fund Dividend program. It’s something that comes out in October once a year, and it just provides a huge, huge economic boost to our state. It provides a huge boost to people. Kids are going back to school. People use it for school supplies, for clothes, for food. Certainly, people go out and use it for big screen TVs and trips to Hawaii, but the studies and research shows the vast majority of it just goes to ordinary bills. Paying your bills and putting money towards college and education, food and fuel, which is very expensive in Alaska.

Owen: Yes, and that pretty much answers my next question, which was just what it means to Alaskans to have this money coming in every year. Because it’s not an income replacement by any means, but $1,000 to $3,000, it’s pretty significant.

Senator Wielechowski: It is significant. When you think about it, a family of four in Alaska makes around, an average family makes around $50,000 per year. If you’re getting $1,600 apiece, you’re looking at a pretty significant amount of money. That’s over $6,000. That’s like 12% of your annual earnings for the average family. Now, I represent a little bit lower income district. Probably the average wage in my district and in some of the nearby districts is maybe around $25,000 or $30,000.

For a family of four, and some of those families have much larger families, it’s a significant portion of their income. Obviously, it impacts people on the lower end of the income scale much more than people on the higher end of the income scale. To make a million dollars, you get another 6,000 bucks, it’s kind of peanuts. If you’re making $25,000 and you’ve got eight people in your family, which is not unusual for some of our families, including extended families, it’s a huge, huge income boost.

It really has helped elevate people, uplift people. We’ve heard stories about people, they save up, they wait till the Permanent Fund Dividend check comes around, and they’ll buy a car so that they can go out and get a job, and get work.

There’s district that I used to represent, 50% of the people don’t have cars. We don’t have the greatest public transportation system here in Alaska. It provides a huge amount of economic freedom for people. Some people save it up and put it in their kids’ college education fund. We’ve got programs that are set up for a local university here. You talk to many, many Alaskans, and they’ll tell you they paid for their college through their Permanent Fund Dividend.

A lot of people, it’s food and fuel. If you go out, particularly in rural Alaska, there are no roads to get there. It takes a plane from Anchorage, it can cost $700 to $1,000 round trip just to get to some of these villages. There is very little economic activity, if any. You have some villages where there’s 50, 60 people. There are no stores, there’s just no economy at all. A gallon of milk could cost you $11. A gallon of gasoline can cost you $7, $8, $10. Extremely expensive. It’s a matter of survival for a lot of people in rural Alaska to get the dividend check.

Owen: That’s fascinating. I have so many questions just about what those villages are like. I’ll try to stay focused here. You were getting into this, but it sounds like you’ve observed some ripple effects from the cash infusion. It’s not just a little extra money, it could mean maybe someone who’s able to then start earning more money because they’re able to, say, invest in a vehicle or something else or they’re able to go to school. It’s maybe the first domino of many in terms of changing people’s lives.

Senator Wielechowski: No doubt, it has a tremendous domino effect. There was a big debate when they started the program as to whether or not kids could get it. Ultimately, they decided that, well, parents could apply for their kids or guardians would apply for the children. Children do get it. Some parents will save up and use that for college. Other parents, they just can’t afford to do that. They’ll use that to go out and start small businesses.

I’ve heard stories about people who, they’ll pull up their entire family’s Permanent Fund Dividend check, and they’ll start a small business. They’ll start maybe a food truck, or they’ll go out and get a car and be able to have somebody go to work and earn money for the family. There are definitely domino effects that occur because of this. In rural Alaska, we have many people that live a subsistence lifestyle. There are no stores, there are no grocery stores, you can’t walk down the street or even drive your car and go to a grocery store.

A lot of people live a subsistence lifestyle. For them, it’s really important that they have maybe a snow machine which will enable them to get out and pick berries, or go hunting, or go fishing. Of course, you need gas to go and do that, to use your snow machine or your boat, for example. It really is just a matter of survival, because the prices are so high up there. You just can’t really comprehend the cost and how it is in some of these communities, some of these villages.

Owen: Just a logistical question: when children get the fund, does that go to their parents or does it– like a separate bank account or something?

Senator Wielechowski: If you’re under 18 in Alaska, then your parents go ahead and file for you. The parents ultimately decide where that money goes. This was a big, big debate when you go back and look at the historical minutes of creating the Permanent Fund. Some people thought kids shouldn’t get it and that it should just go to people over 18. Ultimately the decision was made. You know what? If you’re an Alaskan resident, if you were just born– in fact, we have a special provision, you have to live a full calendar year in the state of Alaska. If you are a child and you’re born on December 31, it says, then you’re treated as if you’ve lived in in the state for full year.

Part of that was just the recognition that kids are expensive and parents should be able to have access to that money. Like I said, some parents will use it for education savings. Others will use it for just basic food supplies, clothing, shelter, rent, to fuel, things like that.

Owen: The Permanent Fund is, as far as I know, the only program in the United States where the only requirement is to be a resident of the state. There’s no income requirement, there’s no disability or anything like that. Has there ever been a pushback from people saying this shouldn’t go to millionaires or some kind of requirement?

Senator Wielechowski: We have this debate every now and then. There definitely are some people that believe that, but it becomes fundamentally how do you look at what the Permanent Fund in Alaska is. I think if you were to ask most Alaskans, you may get a little bit different explanation or belief on what the purpose of it is. I think from my perspective, and I think the way many Alaskans will look at it, is it’s our ownership share.

We have these tremendous natural resources here in Alaska. The Permanent Fund is comprised of the royalties from mining from oil, from gas. You have these tremendous resources. It’s looked at like an ownership share. If you have a stock in AT&T, or Apple, or Google, for example, and you get a dividend, it doesn’t matter if you’re a millionaire, if you don’t have any money at all. It’s your ownership share.

I think that’s the way that most Alaskans look at it, is it’s my ownership share. I’m an Alaskan and I, through the Alaska constitution, own part of the resources. They belong to the to the state collectively, and I’m a resident of the state. It’s how we share in all our resources.

When you step back, and you say we’re going to start excluding millionaires, rich people, in which we don’t have a huge number in Alaska, then it changes the way the Permanent Fund is viewed in the state. It changes it more of from an ownership share to maybe what some people would perceive as an entitlement. I think in Alaska, we prefer to look at it, and I think it’s the better way to look at it certainly for us, as an ownership share.

Owen: It really does change the mentality around it when it’s not some people get it and some people don’t. Speaking of the politics around the Permanent Fund, just in the last year, the representatives in Alaska took some money out of the fund to pay for government. Can you just update us on the state of the fund? Is it under threat and just what’s going on with that right now?

Senator Wielechowski: The Permanent Fund is under threat. In fact, it’s been under threat since the very day that it passed back in 1982. There was a governor that ran– sort of the godfather of the Permanent Fund is our former Governor Jay Hammond, it was his vision. He termed out in 1982 and a new governor was elected, a guy named Bill Sheffield. One of his top priorities was actually to get rid of the Permanent Fund. He didn’t like the idea of paying out a dividend.

What we’ve seen over the years ever since we’ve had it is rich and powerful special interests have been chomping at the bit to get into the Permanent Fund. It’s this huge pool of money. Right now, every Alaskan gets, this year it’ll be $1,600 dollars every man, woman, and child. That doesn’t matter if you’re politically connected. It doesn’t matter who your mother or father is or your access to maybe some powerful political figure. If you were to change that and give all that money to government and allow the politicians to divvy it up, then who gets it?

Well, people more likely to get it are those who are very well politically connected. Those who understand how to use the political process to their advantage. Those who are big campaign contributors. They often somehow tend to benefit from these things. What happens is someone who’s rich and powerful, they’re able to come in and get maybe 1000 times what they would ordinarily get or more, a million times. Look at what government dolls out to special interest in terms of tax breaks and tax credits and just flat out giving money away. The rich and powerful who know how to use the political process get more money that way.

This has been a constant struggle in Alaska ever since the very day that the Permanent Fund Dividend was created. The rich and powerful, big special interests, have always wanted to get rid of it because they want to get more for themselves. It’s been a constant fight because the rest of the people are not as organized. They tend not to be as organized and as politically active. There’s been that constant fight.

In 1999, we were in a similar situation. We very dependent on the price of oil. The price of oil was down in ’99. There was talk about, “Hey, we’re going to have to start using the Permanent Fund to pay for government,” and they decided to put it out to a vote of the people. The oil companies spend millions of dollars and the big special interests Chamber of Commerce came in and spent huge amounts of money trying to convince people that we really need to start using the Permanent Fund for government.

The supporters literally spent millions of dollars. The opponent’s was just this ragtag group of people. They spent about $5,000. The opposition got 83% of the vote. 83% of Alaskans said no, don’t touch the Permanent Fund. Don’t use it for government.

Now we have a governor who’s just been hell-bent on getting into the Permanent Fund and cutting the dividends, slashing dividends. For the first time in history, he unilaterally cut the dividend. He vetoed the dividend. I sued him. I went to the Supreme Court, unfortunately, Supreme Court found in his favor. Then since then, so in 2016, 2017, and now 2018, the dividend has been cut. It’s been at the push of large multinational corporations, very wealthy special interests who want to get into the Permanent Fund and want to use that for government. They want to be able to have access to that money.

That dividend this year is supposed to be about 2,700, instead it’s going to be about 1,600. It’s a big issue politically. It’s going to be a big issue in the upcoming elections, and we’ll see what happens with that.

Owen: It is a live issue that gets a lot of play in your elections? You talk about it, I’m sure, but has it come up in governor’s race as well?

Senator Wielechowski: Absolutely. This year will be the first year where it’s going to be just a huge issue. It is probably one of the focal issues in this upcoming election cycle, certainly for governor, because you have a governor who made it really, his top priority was to cut the dividend. There have been Facebook pages that have started up and groups that have started up. The one thing about social media is it’s allowed everyday ordinary Alaskans to mobilize.

We had this one Facebook group that started up, it’s got about 18,000 or 19,000 members, which is a lot for Alaska. They’re opposing the cutting of the Permanent Fund Dividend check. There are small groups that start up, but it’s not like you’re a big corporation and you can assign a few people make $100,000 to go out and have an astroturf social media program. This is a small group of people.

If you go and you talk to the people on the street, if you go door to door, if you go to the local grocery store, go talk to people at town hall meetings, they’re very interested in this issue. This is a huge issue to them. The majority of Alaskans don’t support what’s happening. We’ll see how it plays out in the upcoming election.

Owen: Is this something that those of us in the other 49 states can help out with in any way or is it more your fight?

Senator Wielechowski: Well, we’re always looking for help. Funding-wise, we have some strict laws on how much money candidates can get from outside of the state, which I think is a good thing. There’s probably ways that people can help, and we’ve worked with some organizations outside that are interested in basic income and look at the Permanent Fund as a type of basic income. They’ve been helpful. They’ve come to Alaska, met with them, have had good discussions with them, and they’ve offered some help.

We’re always looking for help. We’re a small state. It’s just special interests here have an unbelievable amount of power. We have yet to truly organize the people to be able to stand up to protect the dividend. We’re fighting now.

Owen: The last thing I want to ask you is about Alaska as a model for other states and maybe the country as a whole. Even Hillary Clinton in her book after the election wrote that she was considering a program that she was actually calling Alaska for America where we use the public resources, create a fund and distributed dividend. Do you think that basic model would work anywhere?

Senator Wielechowski: I do. I do. Absolutely. When you think about it, in the United States, in Alaska, why would it be any different? The oil and gas, it belongs to all the people. If you’ve got oil and gas in the ground, there are certainly federal lands where there’s a tremendous amount of oil and gas and mining resources and timber resources — that belongs to all the people. It doesn’t just belong to a select small group of special interests, it belongs to all the people. Why shouldn’t you be able to take a portion of that and give it back to the people?

I think it would have a tremendously positive impact on the lives of potentially every American. Scale-wise, you have to work out how the numbers work, but this country is just unbelievably blessed with incredible natural resources, and they belong to all the people. I think we can probably work out a way to figure out how to share that with every American. Absolutely.

Owen: Well, is there anything else you’d like to add?

Senator Wielechowski: I have read and I believe the Alaska Permanent Fund Dividend program is one of the most successful political programs in the history of the United States, if not the world. You look at the polling, and I’ve seen what it does to the lives of tens of thousands of Alaskans. There’s just tons of research on it lifting people out of poverty and providing education and food and fuel and just basic things that you need in life to move on and providing a tremendous economic activity. It is something that I think has been tremendously successful. I don’t think anyone would disagree with that.

I think we need to figure out a way that we can take this, use this as a model and have it all around the country. Have it in the United States. I know it’s starting to pick up some steam, and we’ve seen other attempts and in the rest of the world. There’s some communities, now they’re talking about doing it in the United States. This is definitely an issue that’s worth moving forward on and worth fighting for. It’s been tremendously successful here. I don’t see why it could be tremendously successful throughout the country.

Jim: That was Owen speaking with Senator Bill Wielechowski of Alaska about the Alaska Permanent Fund.

Owen: I just found it was striking how much the dividend is incorporated into people’s lives. It’s just, say, $2,000 one time a year, but for some people in some families, it seems to be really deeply incorporated into their incomes and how they plan out the whole year.

Jim: I think that’s not necessarily unique to a universal income program. I think, oftentimes, any sort of social support program, at least one that’s visible to people, once it’s in place, it starts to feel natural, and it’s just something that’s there. I think given the conversation that often happens around universal income, and this idea that once we have this, “Oh my gosh, what’s going to happen? Will people stop working? Will they be buying all these terrible things?” These nightmare scenarios that people throw out there, even though they’re not based on evidence.

Actually seeing this immediate example of, “Oh, once you have this, it’s just there and life gets easier for people.” You have less inequality but it doesn’t actually look completely different or foreign in an ongoing way.

Owen: I also thought that Wielechowski really showed how versatile cash is. You’ve got these rural villages where you can’t even take a road to get there. You have to fly there, and they’re mostly hunter-gatherer type societies. They have very specific needs, and it’s not what you normally think of when you think of what cash can be used for. You think housing and food, but cash helps them in the same way that it helps a family of four in Anchorage, say. It helps you fill in whatever gaps who have, whether that’s milk and gasoline for the rural society or the school supplies maybe for Anchorage.

Jim: Right. Yet another example of how you can imagine if someone were to come in and at the state level be thinking about, “Okay, what are our support programs?” If they were to design some in-kind system, it’s very, very possible they might have overlooked some of these cases and come up with a solution that wasn’t actually the right one for a lot of people, whereas with cash, as you say, you have that versatility, and so everyone is able to figure out for themselves what they actually want to do with it.

The other thing that really struck me in the conversation was hearing more about the political dynamics that have happened over time with the Permanent Fund. The fact that there really has been, it seems like almost constant attempts to raid the fund by government over time, and it has actually, up until this most recent issue, has managed to defend itself against that because people did have that sense of ownership there. You can think of a few examples of other social programs that have managed to withstand outside attempts to disrupt them, but that seems pretty exceptional.

Owen: Yes, and it shows the popularity of the fund with the polls that have been done on it show that people are happy to have higher taxes to sustain the fund and that, yes, even when people in power want to take it down, usually the people rise up. Hopefully, that will happen again, because as Wielechowski said, it is under threat right now.

Jim: Right, and I am very curious to see what the results of this upcoming election will be and if that ends up being a referendum on this effort to raid it. If it does, I think that says even more. Letting us gain more insight into what something like this means there and extrapolate from that as to what the dynamics might be in other places.

Owen: Alright, that will do it for this episode of the Basic Income Podcast. Thank you to our producer Erick Davidson. Please subscribe on Apple Podcast or the service of your choice, and tell your friends about the show so we can bring in more people into this conversation. See you next week.

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