The Alaska Permanent Fund is a Universal Basic Income

Alaska may be reliably conservative at the federal level, voting for Republican presidential candidates since 1964 and electing one Democratic senator since 1980, but at the state level, Alaskans embrace incredibly progressive policies, namely the Alaska Permanent Fund.

In 1976, Alaska voted overwhelmingly in favor of a constitutional amendment that created the Alaska Permanent Fund, funded by revenue from natural resource extraction, that will provide a future stream of income for the state upon oil depletion while also supplying the state with a universal basic income.

The Alaskan Constitution

The amendment mandates that “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 Alaska Permanent Fund] shall be deposited in the general fund unless otherwise provided by law.”





A few years before establishing the Alaska Permanent Fund, the state received a $900 million oil windfall but, rather than saving it, spent the money on public infrastructure. Though the state – the second youngest in the union – undoubtedly needed public investment, residents soon viewed the $900 million expenditure as a waste.

The Alaska Permanent Fund prevents future wasteful spending by removing a large portion of the oil revenue from the legislative spending stream. Its investments will help fund the government in the future – prudent lawmakers recognized that oil revenues would not last forever (no money from a finite natural resource could) – through investment dividend. As the state touts, the Alaska Permanent Fund takes a non-renewable natural resource and turns it into a renewable source of wealth.





How the Alaska Permanent Fund Works

Each year, the fund receives oil and gas royalties, income from the funds investments, and any other appropriations made by the state. It then pays qualifying residents a dividend from realized investment gains. State law fixes the dividend at an amount equal to the Alaska Permanent Fund’s net income over the last five years multiplied by 21 percent, divided by 2, and then divided by the number of eligible applicants. This (somewhat) stabilizes the dividend across years.

While this universal basic income is obviously not large enough to (significantly) change employment calculus, it has resulted in Alaska having the fifth-lowest rate of poverty in the country. The Fund also frees Alaskans from the burden of an income tax, though that might change as oil depletion continues and prices stagnate at low levels.





Alaska for America?

Many progressive have begun to dream about a nationwide universal basic income to offset the likely employment drop-off from the continued automation of our economy. Ideas floated would be on a much larger scale than the Alaska Permanent Fund – progressives want annual dividends to be at least $10,000. But, unlike Alaska, the United States as a whole does not have an easy to pay for a universal basic income.

Hillary Clinton considered an “Alaska for America” program that would use revenues from “shared national resources includ[ing] oil and gas extracted from public lands and the public airwaves used by broadcasters and mobile phone companies,” a carbon tax, and perhaps “a financial transaction tax” to pay a universal basic income.





However, Clinton “couldn’t make the numbers work. To provide a meaningful dividend each year to every citizen, you’d have to raise enormous sums of money, and that would either mean a lot of new taxes or cannibalizing other important programs. We decided it was exciting but not realistic, and left it on the shelf.”

While the Alaska Permanent Fund may work for the state, it likely couldn’t be implemented on a national scale – at least not at a level that would provide all citizens with a meaningful basic income. Regardless, studying the Alaska Permanent Fund may raise new insights into how a progressive goal could come to fruition.

So while a universal basic income remains a national fantasy, states – the laboratories of democracy – have experimented and Alaska, a deep-red state known for its conservatism, has developed perhaps the most progressive policy in the country.







