JUNEAU, Alaska — In Alaska today, 640,000 citizens receive an annual cash hand-out of around $1,884 in what is known in Alaska as the permanent fund dividend. This cash handout is given universally to all Alaskan citizens, so long as they are a) from Alaska and b) alive.
The scheme is the closest that any American state has ever come to practicing a form of Universal or partial-Benefit Income–where every citizen receives a certain amount of money from the state.
This system is currently being implemented in Utretch, the Netherlands, and was previously executed in Manitoba, Canada, where the city’s poorest residents received cash sums between 1974 and 1979.
Alaska’s scheme, which is entirely unique within the United States, all began in 1976, when the Alaskan state had reaped $900 million in revenue from oil drilling practices during the construction of the Trans-Alaska pipeline.
A few years later, however, the money had all dried up, prompting Alaskans to realize that they needed to develop a more long-term solution in order to find ways to better manage their money.
In order to achieve this, an amendment was added to the state constitution to set aside a portion of oil income for future generations and use.
The amendment stated “at least 25 percent of all mineral lease rentals, royalties, royalty sales proceeds, federal mineral revenue-sharing payments and bonuses received by the state be placed in a permanent fund, the principal of which may only be used for income-producing investments.”
This set-aside money then became the basis for the Permanent Fund Dividend, which continues to hand out money to Alaskan citizens almost three decades later.
According to economic experts, Alaska’s permanent fund dividend offers an insightful model for how a state can help protect its own citizens from the instability wrought by a devalued and unstable stock and job market.
As President Obama’s recent visit to Alaska helped point out, Alaska’s scheme will also be hugely beneficial for Alaskans in the future, when climate change will inevitably cause Alaskan society, and the Alaskan economy, to become more unstable.
In the decades that have passed since the fund was originally created, the Fund has diversified and decoupled itself from oil–which has increasingly been regarded as an unreliable source of income.
According to Laura Achee, a spokeswoman for the Fund, “Our current portfolio includes global bond, stock and real estate investments, private equity, infrastructure, multi-asset funds and hedge funds.”
Investments that help encourage the growth of the Alaskan fund thus include a bizarre array of businesses and enterprises, such as Danish wind power, the New York Times, and Brazilian Banks.
This diversification, in turn, has been hugely beneficial in helping to bolster Alaska’s funds–which surpassed the state’s oil revenues in 1998. Now, the Fund is worth around $51.2 billion, according to Ms. Achee.
The success of Alaska’s fund has also inspired economists the world-over, who have argued that Jay Hammond, the governor at the time and brains behind the idea, created a model that other states–and countries–would be wise to follow.
In a paper conducted on 2012, it also became apparent that Alaska’s scheme has helped to close an income gap that is widening in other American states by helping to bolster the lower and lower-middle classes.
In fact, the report revealed that Alaska is the only state in which the bottom 20 percent of the population grew at a faster rate (25 percent) than the income of the top 20 percent. The fund has also helped keep thousands of Alaskan citizens from falling below the poverty line.
In an era in which income inequalities have been growing and in which tumultuous drops in the market–such as was recently witnessed by the 2008 economic crash–have produced a volatile market, it seems that Alaska and its permanent fund dividend model might just be onto something.
Today, Alaska, which is one of America’s richest states per capita, also enjoys the benefit of having the second-lowest income inequality in the country after Utah.
– Ana Powell
Sources: Al Jazzera, VICE 1, VICE 2