There is no question that the 2017 legislative session will focus in large part on using Permanent Fund earnings to cover some costs of government programs. In addition, the debate over use of the fund’s earnings will likely become entangled in a heated debate over scaling back the annual payout of the Permanent Fund Dividend and shifting those funds to reduce Alaska’s $3 billion budget deficit.
However, although there is no doubt that many Alaskans are fans of the PFD program, a little known (and ironic) fact is that the legislation which gave birth to the current program came within a whisker of being vetoed by Gov. Jay Hammond after the bill reached his desk near the end of the 1982 legislative session.
Here’s the Reader’s Digest version of how this bit of Alaska history rolled out.
The concept of the PFD was created by Gov. Hammond. The governor’s idea centered on creating a program that would share a portion of Alaska’s resource wealth with every resident. A key element in the governor’s proposal was to increase the size of an individual’s PFD for each year they had lived in the state since statehood.
Gov. Hammond had hoped that by passing legislation during the 1980 session, the PFD program that he had spent years thinking about and working hard to pass into law, would never be changed. However, the governor’s hopes were dashed when a lawsuit was filed by Penny and Ron Zobel in state court claiming the newly-minted PFD program was unconstitutional.
The Alaska Supreme Court upheld the 1980 PFD statute by a 3-2 vote, but the U.S. Supreme Court ruled the state PFD law was unconstitutional and tossed out the statute in its decision which was released on June 14, 1982.
Justices of the U.S. Supreme Court had signaled their skepticism of the PFD’s validity during the court’s hearing of the PFD case on Oct. 7, 1981, so it came as no surprise when the court struck down the 1980 PFD statute (only conservative Justice Rehnquist sided with the state in the court’s decision).
Anticipating a potentially negative decision from the U.S. Supreme Court, Gov. Hammond directed those of us on his staff, and the Department of Law, to develop backstop legislation which could be passed quickly if the U.S. Supreme Court struck down the governor’s PFD statutory scheme.
The backstop plan was literally passed by the House and Senate within hours of the U.S. Supreme Court’s decision and had as its foundational element that the annual dividend would be funded by Permanent Fund earnings.
The next step seemed simple and straightforward: Gov. Hammond would sign his backstop bill and nail down a statutory PFD program that would pass constitutional muster. Although I realized the governor had serious problems with what he called the “Zobelized” PFD program, I was certain that he would sign the bill into law.
Wow, was I wrong!
The governor often came into my office when he wanted to discuss issues of concern that he was mulling over. So it was not unusual when he came into my office to discuss the backstop PFD bill that was on his desk.
To make a long story short, he told me that upon reconsidering the backstop bill, he could no longer support it and was going to veto it. However, before vetoing the bill, the governor asked me send him a memo outlining reasons why he should sign the bill.
His request was not unusual as he often asked me to share my thoughts with him on issues that were on his radar screen. During our conversation I suggested that before making a final “veto/no veto” decision, he should also discuss it with some of his closest friends such as Clem Tillion, Av Gross and Kent Dawson — which I believe he did.
To this day I really don’t know why the governor changed his mind and signed the PFD backstop legislation. He shared his decision with me about 15 minutes before he signed the bill when he popped into my office and told me he would — very reluctantly — approve the backstop legislation.
Literally minutes later, the Department of Revenue cranked up the computers and began printing the first dividend checks. And the checks bore the signature of then-Administration Commissioner Carole Burger, not Jay Hammond’s. I guess the governor’s refusal to have his signature on the PFD checks was his way of underscoring his unhappiness with a “Zobelized” program.
However, as time marched on, Jay Hammond became the PFD’s program most ardent supporter, even in its “Zobelized” form.
• Jerry Reinwand was Gov. Jay Hammond’s top aide during his second term and served in the same position for then-Sen. Frank Murkowski in the Senator’s Washington, D.C. office.
