When the Alaska Legislature passed the state budget June 22, it also voted for the first time to cut money for Permanent Fund dividends. By doing this, it followed in the steps of Gov. Bill Walker, who cut PFDs in half last year to maintain state savings.
The PFD cut will affect those in some Alaska communities more than others.
This map shows the estimated effect of reducing Permanent Fund dividends through the state operating budget. It draws on U.S. Census American Community Survey income estimates for each borough and Unorganized Borough census area. The income estimates are modified to reflect 2017 PFD projections. The projected amount for 2017 PFDs was calculated based on Permanent Fund growth through May 31, minus spending to administer PFDs and other appropriations.
Ben Nukusuk needs a snow machine to get around Hooper Bay, an 1,093-person city on Alaska’s Bering Sea coast. He was planning on using his Permanent Fund dividend in October to make a down payment on a new one.
“A lot of the families rely on the PFD, so they can purchase the big-ticket items, namely: snow machine, outboard (motor) or boat,” Nukusuk said. “Because people just don’t have that kind of money now – one lump sum, such as the PFD, especially on the good years.”
And 2017 was going to be a good year.
Years of investment growth were on track to push PFDs to an estimated $2,318.
Without adjusting for inflation, that’s the highest in the fund’s history. But the Legislature cut funding to $1,100.
This cut will hit Nukusuk more than most Alaskans. His household has 11 people, including his children’s families and two foster kids. That means they’ll lose more than $11,000. That’s close to half their household income.
“It may not be so much to somebody who lives in the urban area who makes over $100,000 a year or $150,000, but for people like us, that’s a big deal,” Nukusuk said.
Hooper Bay is in the Kusilvak census area, where the average loss of household income would be more than 10 percent, according to a KTOO and Alaska Public Media analysis. That’s the highest loss in the state.
Juneau residents would lose 3 percent, the lowest loss.
Nukusuk said he’s frustrated the Legislature enacted the funding cut without passing a plan to balance the state’s budget in the future.
“I wish they’d get their act together,” Nukusuk said. “There’s so many smart people in Juneau and I don’t want to see our state go under too, but there are so many people who are down there who can put two and two together.”
State Fish and Game Commissioner Sam Cotten was a state representative when the state started PFDs in 1982. He said lawmakers knew then that it would be difficult to reduce dividends once they were started.
“There was a discussion then about (how) some day there’d be a contest between getting rid of or reducing the PFD and having income taxes or other broad-based taxes,” Cotten said. “Certainly, the expectation was if you had to reduce or eliminate them, that it wouldn’t be an easy thing to do. It would not be a popular thing to do.”
Cotten expressed sympathy for residents from lower-income portions of the state who feel they’re carrying the burden for balancing the budget. Agreeing on a long-term budget plan is essential, he said.
“Then it might be fairer to say, ‘OK, we’ll find another source of income, reduce, not eliminate the dividends as a fair approach,’” Cotten said. “But if you reduce or eliminate dividends as the only measure, then that’s not a fair approach.”
While opponents of an income tax have cited its potential effect on the urban economy, village residents are concerned about the PFD cut’s impact on rural economies.
Nile Aguchak also lives in the Kusilvak Census Area, in Scammon Bay. He said everyone in the city of 474 residents will be harmed by the PFD cut.
“I know that extra $1,200 would have been very helpful,” Aguchak said. “When they’re paying five dollars plus a gallon for heating and for running operations, which includes gas, diesel and so on, you know, all of this adds up somewhere.”
The House and Senate couldn’t agree on legislation to draw from Permanent Fund earnings to pay for state government.
House members say the plan – and future PFD cuts – should depend on adding oil and gas taxes and a broad-based tax. Senators reject that approach, and say a Permanent Fund plan should be passed on its own.
Correction: An earlier version of this story overstated the amount Ben Nukusuk’s family would lose. It would lose nearly $11,000, not $13,000.