Nationalizing Resources: Reclaiming the Commons in Alaska

Image

The Permanent Fund Dividend (PFD), or Alaska Dividend, is a unique yearly dividend for Alaska residents. In 1959, Alaska’s largest oil reserve was discovered, resulting in a great deal of wealth for the state from its oil reserves. In 1976, Alaska amended its constitution to dedicate approximately 25 percent of its yearly oil revenues to a state investment fund. It is called the Alaska Permanent Fund. The purpose of the fund is to ensure future generations of Alaskans will be able to benefit from Alaska’s natural resources, even when those resources have been depleted.

The 1976 Prudhoe Bay oil lease sale brought in $900 million in revenue. The Fund was invested entirely in bonds. For four years public discussions took place regarding whether the Permanent Fund should be managed as an investment fund or as an economic development bank. In 1980 the state legislature created the Alaska Permanent Fund Corporation to manage the investments of the Permanent Fund and to create the first Permanent Fund Dividend program.

In 1982 the first Permanent Fund dividend check of $1,000 was distributed. The Legislature pays this first dividend, not with Permanent Fund income, but with surplus oil revenues.

Monies from the Permanent Fund were invested in the stock market and in real estate – within a few years the Permanent Fund’s performance ranks in the top 9% of all public funds in the US. By 1993 assets in the fund reach $15 billion. In 1998, Fund earnings exceed state oil revenues as the Fund reaches the $25 billion mark.

In 2001, the Board of Trustees endorsed a constitutional amendment to change Permanent Fund payouts to a percent of the Fund’s total value (POMV).

Republican Governor Wally Hickel, who was instrumental in bringing about the Fund,  has sought to spread the model to other countries. In a 2009 message via video conference to Durban, South Africa, a 90-year-old Hickel said:

In Alaska, we live on the commons. We benefit from the commons. We care for the commons. From common ownership of our land and our resources, has emerged a new model for modern society. We call ourselves the Owner State. And what we own is the commons. We believe our model surpasses both capitalism and socialism. When this approach is understood, worldwide, there will be no legitimate reason for poverty; especially in Africa, a continent so rich in resources. This year, Alaska marks its 50th anniversary as one of the 50 United States. But we are different from all the others. Prior to statehood, we were a colony, and a helpless victim of mining, fishing, and shipping monopolies. They plundered our resources, and left our people ignorant and in poverty. Just as multinationals today plunder South America, Asia, and Africa, sucking the wealth from the resource-rich wealth commons, leaving the rightful owners hungry and destitute… I urge you to study the building blocks of the Owner State. We are far from perfect, but our experience can be helpful as you reclaim your commons.

The state legislature created the Permanent Fund, run by a board of trustees. In 2004, the Legislature changed state law to require cause before any of the four public members of the Board of Trustees may be removed, helping insulate the Board members from political pressure. The Legislature makes a significant change in how Permanent Fund investments are determined 2005 on Trustees will make investment decisions solely under the guidelines of the prudent investor rule. Fund assets reach $30 billion. After the stock crash of 2008, investments are grouped by the market condition that those assets are intended to address.  This better fits the Board’s goal of building a portfolio that will provide a more stable return under a variety of conditions. As of today the fund is valued at 50 Billion Dollars.

An important effect and result of the fund is it has become a “population magnet.” It creates an obvious incentive to move into and remain in Alaska.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.

%d bloggers like this: