It is time now for the Legislature to seriously consider eliminating the Permanent Fund Dividend (PFD) and to establish a mechanism to provide a replacement income source only for those who are economically disadvantaged.
The 2025 Regular Session of the Alaska Legislature is underway and the legislators are preparing the FY2026 operating budget. They face a greater than the usual dilemma — a much larger funding gap than normal.
The PFD has been a significant component of the budget, to the point that paying the dividend has short-changed other vital Alaskan programs such as education, law enforcement, transportation and state government employee compensation.
The inflating cost of operating our government programs will continue to increase while oil income decreases. For example, in the Department of Revenue’s Fall 2024 Revenue Source Book, petroleum revenues are predicted to fall off for the next decade primarily due to expected lower oil prices. Permanent Fund distributions to the state treasury, which assume favorable financial markets are projected to increase, but total general fund revenues look flat through 2031.
My premise is that we simply cannot afford to pay a dividend and still provide the level of government services Alaskans require. If we continue to pay the dividend, the Legislature must find other sources to fill the gap (i.e. a personal income tax or a regressive statewide sales tax).
Again, some say why not go after the oil industry. Increasing oil taxes will result in the vicious circle of lower petroleum investment, lower oil production and subsequent lower petroleum revenue to Alaska.
So, I suggest that the Legislature consider eliminating the PFD and use those funds to support normal government services. The Permanent Fund was created to provide revenues to the state treasury when oil revenues decline, not to pay dividends. Oil revenues are declining.
The elimination of the PFD would be a major change for state fiscal policy. This may create a reelection dilemma for some legislators who might support such a change. However, when viewed from the context of an income tax or statewide sales tax to pay the dividend, eliminating the dividend is the better choice.
An annual payment equivalent to the dividend should be established to assist only the economically disadvantaged who depend on it for part of their livelihood. For example, a process could be enacted whereby an applicant would submit an application, in the form of an affidavit, that he or she were below a specified threshold income level. The threshold would be adjusted annually for inflation. The state would make a payment equivalent to the existing dividend, and in the future adjusted for inflation, to qualified applicants.
In summary, the Legislature should consider the elimination of the Permanent Fund Dividend. To provide for Alaskans who depend on it, create a like program for those who can demonstrate need. Elimination of the dividend will free up monies for under-funded government services.
• Bill Corbus was the commissioner of the Alaska Department of Revenue between 2003 and 2006.
