Every proposal to shrink or scrap a full Permanent Fund Dividend begins with the same dare: “Can you show me how to pay for it under today’s rules.”

Fine, let’s start with the numbers, but keep Jay Hammond’s warning in mind: protecting the PFD protects the Fund. Once dividends are easy to cut, Fund earnings become just another pot for government and long-term savings, and intergenerational equity erode.

Let’s consider some of the realities with a brief look at the State’s 2024 Annual Comprehensive Financial Report (ACFR) as the latest, audited reality check.

The General Fund revenues were $8,744.7 million with federal receipts amounting to $4,775.5 million (54.6%) restricted to specific purposes and all other (state-controlled) sources: $3,969.2 million (45.4%) taxes, rents/royalties, investment income, misc. The General Fund expenditures charged were $11.83 billion with Health & Human Services at about $3.811B and Education & Early Development at about $1.933B dominating the expenditures. These lines come with federal matching and maintenance-of-effort (MOE) strings of entanglement. Cut too deeply and you forfeit federal dollars.

Spending in the realms of health and education, the very areas bound by federal strings, have grown in ways that are Gordian to unwind without forfeiting federal match.

How did the Legislature close a deficit of over $3B?

The state used transfers. These transfers came mainly from the Permanent Fund’s POMV draw. Roughly $3.5 billion moved from the Earnings Reserve Account (ERA) into the General Fund “to pay dividends and fund operating expenses.” After other routine financing entries, the General Fund still finished FY24 with a net increase of about $588M. In short, the State avoided an over $3B shortfall with Fund earnings and standard transfers. The Legislature demonstrated a net increase because of ERA transfers.

The PFD was $836.5 million paid to 624,489 Alaskans. In effect, of roughly $3.5B drawn from Fund earnings, about $836.5M went to dividends, over $2B helped run government and a net increase of $588M.

What was available to appropriate in the ERA as of 6/30/24? The ERA had $9.7B unrestricted with about $6.1B “assigned” and $3.7B “committed.” (“Committed” means formally bound by legislative action and “assigned” is intended by the Legislature but not legally locked).

By contrast, the Permanent Fund principal, at the time, $70.7B, is nonspendable without a constitutional change.

These are the actual pieces on the board for the FY24 PFD/operating-budget game.

The answer to our introductory question is you can’t get there from here.

The harder question is whether our state government is simply too dumb, fat, and happy or financially incompetent to chase every dollar to its highest need and hold programs to measurable results?

Alaska’s dependence on federal money is not new. For decades we’ve taken Medicaid (pre- and post-expansion), highways, education grants with MOE requirements, disaster funds, and more each with conditions, which over decades entangled Alaska’s fiscal independence into pseudo-slavery. The 2015 Medicaid expansion deepened federal ties inside health care. The pandemic years then supercharged federal flows even further. Today, more than half of GF revenues (54.6%) have been restricted by federal rules, while unrestricted state revenues have softened by $760.3M as compared to FY23.

And now, a word from our sponsor…me. As I have repeatedly yelled from the roof of the Capitol, “We are not a state; we are a colony!”

Spending in the realms of health and education, the very areas bound by federal strings, have grown in ways that are Gordian to unwind without forfeiting federal match. (Remember Alexander cut the knot.) That’s why Fund earnings now shoulder so much of the load. They’re the flexible dollars that backfill the gap and let us avoid the harder work to stabilize Alaska’s operating budget. But relying on the ERA is a painless shortcut for our politicians, especially those tied at the hip to special interests, not a cure.

The honest fix starts with independent, third-party performance and financial audits of state operations: line-by-line cost tracing, unit-cost benchmarking, verification of federal-match compliance, and program outcome tests with sunset triggers. Until we subject agencies to rigorous, outside audits, and act on the findings immediately as well as expand the private sector natural resource development potentials for statewide economic stability and growth, Alaska will keep papering over structural problems and inefficiencies with Fund earnings instead of treating the underlying illness in our economy and budget.

As of this month, the Department of Governmental Efficiency (DOGE) has identified over $665.6B in potential savings to the US taxpayer since President Trump’s inauguration. That’s less than 9 months. One would think that Alaska – given its microcosm similarities to the federal government – could accomplish this in the same time. Am I being generous?

Could FY24 have paid a full statutory PFD?

The simple honest answer is “It depends.” It comes down to prioritization in a state long dependent on federal money and strangled by the strings that come with it. Starting with the Governor’s FY24 full-formula launch point of roughly $2.4B or about $3,800 per person, to pay that inside the POMV draw, lawmakers would have had to reallocate billions away from agencies.

We all know that every extra dollar to dividends is a dollar not available for services unless Alaska adds new revenue or makes real cuts.

The consequences would be to explain which programs and how much federal match to forfeit, which neither the Alaska bureaucracy nor the Legislature appear willing to discover. The alternative was to go above the draw which risks Fund discipline and future capacity. The other alternative would have required adding new recurring revenue (i.e., Taxes with a Capital “T”), which again is the Legislature’s lazy approach to fiscal discipline. In the end, the Legislature appropriated about $836.5M for dividends and used the rest of the draw to operate the state.

The truth is since Wielechowski confirmed PF earnings (including the PFD) are subject to annual appropriation, the dividend now competes head-to-head with state operations whether under the old formula or a POMV cap. As in the past since 2015 and in FY24, the Legislature prioritized operations, instead of Alaskans.

Could the Legislature have flipped its priorities? Maybe, but only with a concrete plan to cut services, accept federal match losses, or raise new revenue. The harder question is whether our state government is simply too dumb, fat, and happy or financially incompetent to chase every dollar to its highest need and hold programs to measurable results? Here’s the truth Alaskans must face. Our budget is hooked on federal money. That dependency didn’t start yesterday and won’t end tomorrow. It shapes every choice we make. Until we confront it head-on, set clear priorities, and enforce disciplined, independent audits with consequences, we’ll keep replaying the same tired fight, PFD versus services, year after year. Isn’t that truly the definition of insanity?

Let’s debate the PFD on mechanics, not labels.

We all know that every extra dollar to dividends is a dollar not available for services unless Alaska adds new revenue or makes real cuts. Supporters of a larger PFD stress household relief, especially in rural communities facing extreme fuel, freight, and food costs, and the stabilizing boost to local businesses.

Advocates for prioritizing services warn that shrinking agency budgets risks losing federal matches, weakening K-12, public safety, health care, and transportation, with costs shifting to local taxes. Both sides want predictability. Can we make a clear rule (e.g., fixed POMV split), hard guardrails to protect the Fund’s future, and honest accounting of what gets cut, or what new revenues are required, so urban and rural Alaskans can plan?

Calling the PFD a “tax,” “socialism,” or “UBI” doesn’t change the math. The structure is what matters. Our state budget contains restricted federal dollars which can’t be freely swapped to pay for anything. Alaska’s health and education bureaucracies carry federal strings that make blunt cuts expensive. We have come to the point where Fund earnings fill the flexible gap, while the PFD is the adjustable dial inside that draw.

If you want a larger PFD without risking the Fund, you must either (a) name the cuts (and the lost federal matches), (b) name the new revenues, or (c) change the rules (and defend the long-term consequences). If you want stable services without shrinking the dividend, the logic runs the same in reverse.

That’s the conversation we should be having, not whether a talking point makes us feel better, but whether our choices protect both Alaska’s families today and Alaska’s wealth tomorrow.

The views expressed here are those of the author.

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