This lease sale not only provided the state with an immediate $900 million, it also put the state into the oil exploration and development business for the long term, with the winning oil companies as its partners. The state owned the land and the oil companies had the resources and the technology to get the oil out of the ground. It was the beginning of an extremely profitable partnership.

For the state, the first question was, "should the $900 million be spent or saved?" It was a huge windfall for a government which had just passed a budget for the previous year of only $112 million. This sudden nine-fold increase in state revenues kicked off quite a debate among Alaskans about what to do with all this new-found wealth.

The overwhelming consensus was that the $900 million should be spent - to provide for basic community needs like water, sewer, roads, schools, airports, etc., and to help meet the pressing human needs of health, education and social services.

The student loan program and the now defunct Longevity Bonus program were two programs started with a portion of that $900 million. However, it wasn't long before the spending consensus was forgotten and there began to develop a statewide negative reaction to the "wasting of the $900 million."

The money hadn't been wasted, but Alaska is such a large area with so many needs, it was difficult for the average citizen to appreciate where all the money had gone. As a new state, Alaska lagged far behind the rest of the country in terms of providing basic infrastructure for its citizens, and even $900 million was not enough to catch up. Fortunately, more money was on the way. Prudhoe Bay was proving to be the largest oil field in North America, and to bring that oil to market, work was commencing on the world's largest privately-financed construction project - the trans-Alaska oil pipeline.

As a result, by the mid-1970s, Alaska was once again riding high on the roller-coaster cycle of boom-and-bust, and pipeline construction was the biggest boom yet. Nonetheless, there were Alaskans with a sense of history who remembered the last windfall (the $900 million), and how that had produced only temporary benefits. These people began wondering how the state could get some permanent benefits from its great oil bonanza.

Alaska has always had many natural resources but, in the past, development of these resources most often seemed to make profits for people who lived in other places. In the 1880s, for example, the Russians profited handsomely from the sale of Alaska furs in Europe and Russia. At the turn of the century, outsiders poured into Alaska to make their fortunes in Alaska gold. Later, Alaska seafood, Alaska copper, Alaska timber, and finally, Alaska oil were offered up for resource exploitation, and as usual, the benefits flowed primarily to outsiders.

Consequently, in 1955-56, when the delegates to Alaska's constitutional convention met in Fairbanks to write what would become the new state constitution, they wanted to make sure that, in the future, Alaskans benefited from the development of Alaska's natural resources.

To accomplish this, they put the following provision into the Alaska Constitution:

Article VIII. Section 2. General Authority. The legislature shall provide for the utilization, development and conservation of all natural resources belonging to the state, including land and waters, for the maximum benefit of its people.

The philosophy contained in this constitutional provision helps explain some of the thought which went into the creation of the Permanent Fund. Because the Permanent Fund was created as a direct consequence of the development of one of the state's greatest natural resources, oil, this constitutional provision provides the philosophic basis for using the income of the Fund for the maximum benefit of its people.

As construction of the trans-Alaska oil pipeline neared completion, Alaskans were becoming increasingly convinced that it would be smart to take at least a portion of the future oil wealth and save it rather than spend it. Through the political process, this popular idea was turned into a ballot proposition, which was placed before the voters in the 1976 General Election. The constitutional amendment read as follows:

ALASKA PERMANENT FUND

At least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the state shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.