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April 16, 2026

Fiscal Policy: Revisiting The Permanent Fund Compact

At a Commonwealth North forum on the Permanent Fund compact, four of five speakers argued Alaska’s dividend experiment has distorted fiscal policy. One argued it is the only thing keeping the state tethered to reality.

ANCHORAGE (04/16/26).

Forum Summary by Ross Johnston, Executive Director, Commonwealth North

How is it that a state with a $86.8 billion fund constantly struggles with a budget deficit?

The Alaska Permanent Fund is the largest pool of public wealth in the Western Hemisphere, built from a single ballot measure that passed in 1976 by roughly two to one.

The fund has been permanent, in the literal sense, for 50 years. The dividend attached to it has been fought over every single legislative session since Governor Bill Walker’s 2016 veto cut the annual payment in half. What was once the third rail of Alaska politics is now the annual appropriation that consumes the oxygen in every budget room.

On April 16, Commonwealth North gathered five speakers to ask whether the compact Alaskans made with themselves in 1976 and 1982 still holds, and what, if anything, should replace it. The lineup tilted heavily toward skepticism of the current arrangement. Four of the five speakers argued, in different registers and from different angles, that the dividend as currently structured is incompatible with a functioning state government. The fifth made the case that without the dividend, Alaska’s political economy collapses into something worse.

Watch the forum: commonwealthnorth.org 

A 31-Word Definition

Larry Persily, the journalist, former federal Alaska North Slope natural gas pipeline coordinator, and longtime voice on Alaska fiscal policy, opened with history. He offered what he called a 31-word definition of the Permanent Fund, drawn from the International Forum of Sovereign Wealth Funds:

The Alaska Permanent Fund was created by the people of Alaska in 1976 as a way to save a portion of the state’s oil revenues for the needs of future generations.

Persily walked the room through the 1976 ballot, which passed 75,588 to 38,518. He noted that no Alaska statewide race has been that lopsided since. He then highlighted something easy to forget. The word “dividend” appears nowhere in the constitutional amendment. The dividend came later, in 1982, after the U.S. Supreme Court struck down the first residency-based version of the program in Zobel v. Williams.

Since that first check, roughly $32 billion has been distributed. A person old enough to have received every dividend, and who avoided felony convictions and prolonged absences, has collected about $54,000 over 43 years.

Persily then returned to the 2016 inflection point. When Walker vetoed the dividend appropriation by half, opponents sued. The Alaska Supreme Court, in Wielechowski v. State of Alaska, ruled that Permanent Fund earnings flow into the general fund like any other revenue and are subject to legislative appropriation. The statutory formula, the court held, did not bind the legislature. That ruling, Persily observed, has shaped every dividend debate since.

One editorial aside worth noting. Persily declined to use his full ten minutes and offered to auction off his unused time to the other panelists. The joke landed. The point underneath it, that the history is quick and the consequences are long, did not require more time to land.

What Other States Do

Angela Rodell, who served as CEO of the Alaska Permanent Fund Corporation from 2015 through 2021, took a different angle. Rodell ran the fund through its most consequential period in a generation. During her tenure, assets grew by more than 60%, from $50 billion to $80 billion. Her tenure also coincided with the statutory adoption of the Percent of Market Value draw, the mechanism that formally established the fund as a sustainable revenue source for state government and that shapes every appropriation debate the legislature has today. Beyond Alaska, she chaired the International Forum of Sovereign Wealth Funds and the Pacific Pension and Investment Institute, giving her a comparative vantage few Alaskans bring to this material.

She set aside the usual comparison to Norway and walked through three U.S. peers. Her thesis was that Alaska’s compact is genuinely unique, and that the uniqueness is now a political liability.

Texas: The Institutional Compact

Texas established its Permanent School Fund in 1845, making it the world’s oldest education endowment. It now holds more than $65 billion, fueled in part by oil and gas leases in the Gulf of Mexico. Its distribution rate maxes at 6%, averaged over 10 years. The State Board of Education determines the draw, subject to legislative backstop. Every dollar flows to public schools. No Texan receives a personal check.

New Mexico: The Evolving Compact

New Mexico’s Land Grant Permanent Fund dates to 1912 and now holds $32.6 billion. In 2022, voters approved a constitutional amendment adding 1.25% on top of the standard 5% draw, dedicated to early childhood education. That brought the total distribution to 6.25%. The amendment included a safeguard. If the fund drops below $17 billion, the extra 1.25% suspends automatically. Rodell flagged this as evidence that a constitutional compact can evolve while still protecting the corpus. No New Mexican receives a personal check.

Wyoming: The Fiscal Compact

Wyoming’s Mineral Trust Fund was created in the 1970s, inspired partly by Alaska’s model. It holds about $12 billion. Its 5% draw on a five-year average flows to the general fund, supporting all state services. Wyoming has no income tax. It also has never paid a citizen dividend, and it does not see the annual fights Alaska sees.

The Accounting Oddity

Rodell underscored a structural point that came up repeatedly later in the evening. Alaska is the only one of these funds with a separate earnings reserve account. Texas, New Mexico, and Wyoming each operate a single-account endowment. That architectural choice in Alaska, made in 1976 and reinforced since, is what makes the annual appropriation fight possible. It is also the subject of an ongoing single-account constitutional amendment effort that has come within one vote of reaching the ballot.

Rodell closed with the question the panel had been asked to address:

Is a post-PFD world inevitable? And what should replace that individual compact we created 40-some years ago?

The Asphyxiation Argument

Rep. Carolyn Hall of District 16, elected in 2024, presented the sharpest institutional case against the current dividend structure. Her thesis, delivered up front:

Alaska will not achieve a durable and stable fiscal plan until we figure out what to do with the Permanent Fund dividend.

Hall walked through the constitutional architecture first. Article 9, Section 15 runs two sentences, 73 words, and contains no reference to a dividend. The dividend, she argued, is a statutory creation, not a right, and the Wielechowski decision confirmed that. A budget that prioritizes a full statutory dividend, she said, is a budget that cannot meet the state’s constitutional obligations to public education, the University of Alaska, public health, and public welfare.

Hall was careful to name the dividend’s genuine value. She cited research indicating the dividend reduces poverty in Alaska by roughly 20% and functions as a lifeline in rural communities that conventional safety net programs cannot replicate. She flagged the 529 college savings program and the Pick. Click. Give. charitable mechanism as secondary benefits. Eliminating the dividend without compensating measures, she warned, would cause harm.

Then she turned to the numbers. The FY27 draft operating budget that the House recently passed allocates nearly $1 billion to dividends. In the current fiscal year, FY26, the operating budget included $685 million for dividends, whereas the capital budget, the funding source for roads, maintenance, and construction,  allocated just $180 million. Alaska carries $2.4 billion in deferred maintenance, $1.5 billion of which is University of Alaska facilities. A full statutory dividend under the governor’s FY27 proposal, Hall showed using a Legislative Finance Division chart, would leave zero funding for most state departments, including Public Safety, the University, Family and Community Services, the courts, Labor, and Natural Resources.

The dividend asphyxiates our ability to provide meaningful public services Alaskans want and need.

Hall closed by reading from Dave Rose’s book, Saving for the Future, on how the legislature in the 1990s raided one-time revenues to avoid taxes or drawing from the fund, letting roads, schools, and university facilities decay in the process. Rose’s line landed as the indictment she wanted it to:

Although we had ample income to cover our needs, legislators preferred to let our infrastructure fall apart rather than be perceived as raiding the “dividend fund”.

Her proposal was two items. Pause the dividend until the state can reasonably afford it. Refocus spending on constitutional obligations and the deferred maintenance backlog. “It doesn’t have to be this way,” she concluded.

A Republican Defense of the Check

Rep. Will Stapp of District 32, an Army veteran and member of the House Minority, opened by acknowledging the unusual position he was in. “I didn’t think I’d have to stand in front of people and be the first PFD defender today,” he said. He was the only speaker arguing that the dividend, as a structural feature of Alaska’s political economy, should be preserved.

Stapp’s core argument was economic and political, not sentimental. He framed the PFD as a de facto spending cap on government, one that forces legislators to justify expenditures against the concrete counterfactual of constituent checks. Without it, he argued, Alaska lacks any mechanism to discipline spending, and the state’s structural dependence on resource extraction becomes politically invisible to voters.

He presented the math as a choice. A full statutory dividend requires approximately $1.6 billion. That can come from broad-based taxes, service cuts of equivalent size, or some combination. He was direct about his own position. Stapp opposes statewide income or sales taxes so long as a dividend exists. He supports revisiting oil and gas production tax where appropriate. He made a point of noting that the governor’s recent tax proposal, the first since 2019, was hated by Stapp’s own caucus colleagues, including those who publicly champion the full statutory dividend. None of them, he said, went on record supporting the taxes required to fund it.

Numbers don’t lie. People do.

Stapp’s second thread was about public perception. Most Alaskans, he argued, believe the dividend is directly tied to resource wealth, their personal share of collectively owned minerals. Whether or not that belief tracks the statutory mechanics, it is the belief that gives the dividend its political durability. Removing the check, without replacing the underlying story about Alaska’s relationship to its resources, produces something worse than the status quo.

He recounted a recent vote cutting the FY27 dividend to $1,500, the largest amount he judged sustainable without further service reductions. The reaction, he told the room, was withering. He displayed a sample of constituent messages, some profane, some violent in tone, and observed that the anger was misdirected. Voters had been told, for years and by multiple administrations, that no tradeoff was required. Stapp’s refrain was about that dishonesty:

If you run for governor and you say I’m not gonna tax nobody, you’re gonna get a big dividend, and you’re gonna get a $2,000 BSA? Tell the person to go pound sand. Because they’re lying to you.

One editorial seam worth flagging. Stapp and Rep. Hall, representing opposite sides of the dividend question, agreed almost entirely on one point: the public has been misled for years by elected officials unwilling to name tradeoffs. They disagreed sharply on what the tradeoff should be. They agreed that the absence of honesty is the binding constraint.

Stapp closed with a warning about the alternative he saw in other small states: a bureaucratic malaise “designed to grind your soul into powder.” Keep the dividend, he argued, because it keeps voters connected to the state’s resource base, and resource development is the only plausible path to the revenues Alaska actually needs.

Three Disconnects 

Sen. Robert Myers of North Pole, Senate District Q, closed the speaker portion with the evening’s most structural argument. His starting point was economic, not political. Myers asked the room to think of the Permanent Fund Dividend not as a social program but as a substitute for something Alaska does not have: private mineral royalties.

In most oil and gas states, when resources are extracted, royalty payments flow to private landowners who own the mineral rights. Those dollars circulate through the local economy. People buy equipment, start businesses, hire workers. In Alaska, the state owns the mineral rights on state land. Royalties flow to the treasury, and from there into government services and the Permanent Fund. The PFD, Myers argued, is the one mechanism that returns any of that royalty stream to individuals, where it behaves economically like a private royalty would.

That framing set up his central claim. By routing resource wealth through government rather than through households and businesses, Alaska has created three disconnects that keep the state stuck.

The first disconnect is between government and the economy. Because state revenue comes from oil royalties and fund earnings rather than from taxes on Alaskan economic activity, the legislature has no institutional reason to care whether the private economy grows. Myers credited this observation to ISER economist Scott Goldsmith’s work in the 1980s. The legislature holds annual hearings on oil income and fund performance. It holds almost none on the health of the private economy. At best, growth is something to absorb, because more people mean more schools and more troopers without more revenue to pay for them. At worst, growth is something to be avoided or thwarted because the state does not want to offset the increased demands for services with less flexibility in the budget.

The second disconnect is between voters and the cost of government. Because Alaskans pay almost nothing in state taxes, services feel free. Human nature being what it is, Myers said, what is free attracts demand, and there is no incentive to ask whether the service is well delivered. The legislature spends money on what is politically popular, not what is the best investment.

The third disconnect is between short-term political cycles and long-term consequences. Without tax pressure to discipline decision-making, legislators reach for the revenue options with the smallest immediate pain and, according to recent ISER research, the worst long-term economic effects. The same logic applies to spending. Legislators cut ribbons on new schools. They do not cut ribbons on HVAC replacements or pothole repairs.

Myers made the pattern concrete with a single example. He asked his staff to take the 1967 general fund budget, the last one passed before Prudhoe Bay production, and index each department’s appropriation to population and inflation. Then they compared it against current spending. Most departments were up. The Department of Transportation operating budget, the line that funds road maintenance, was down. In the same year the legislature scrambled to find $70 million to meet the federal match for construction, Alaska cut maintenance spending by 12%, roughly $13 million. Construction projects employ people for a summer and produce ribbon cuttings. Maintenance produces neither.

The problem isn’t money. The problem is our priorities. And our priorities are driven by our revenue model.

Then Myers offered the counterfactual. He pointed to a 2017 study comparing natural gas development in the United Kingdom and Pennsylvania between 2000 and 2014. In the UK, royalties flow to the government. In Pennsylvania, they flow primarily to private landowners. The study found that private royalties produced more than double the economic activity per dollar, before accounting for downstream industry expansion. Myers’s inference was that dollars distributed to households and businesses do more economic work than the same dollars appropriated by the government. Applied to Alaska, a PFD functioning closer to a true royalty distribution, with a smaller share of fund earnings going to government appropriation, would produce more growth than the current split.

He closed with the data point that was hardest to shake. Since 1984, Alaska has had the worst household income growth of any state in the country. Median household income growth since 1970 tracks roughly with the Rust Belt. Myers’s conclusion was that Alaska’s flat economy predates the 2015 oil crash and the current dividend fights. The shape of the fiscal architecture, not any particular year’s appropriation, is what has held Alaska in place.

Without proposing a specific broad-based tax, Senator Myers suggested that the government funded by the people was accountable to the people.

The Single-Account Question

The Q&A opened with former Rep. Bart LeBon asking the panel two questions at once. Would the panel support consolidating the Permanent Fund’s two-account structure, earnings reserve and principal, into a single endowment? And would the panel support putting the percent of market value draw into the constitution, and at what rate?

The answers aligned more than they diverged.

Stapp answered yes and yes, with the draw rate coming down, possibly to the 4.25% to 4.75% range. His reasoning was mechanical and political. Keeping $12 billion in an earnings reserve creates a target that the legislature will eventually spend, regardless of current intent. Protection requires constitutional architecture, not legislative discipline.

Hall concurred on both counts, noting she had co-sponsored Rep. Calvin Schrage’s single-account legislation. She indicated 4.5% as her preferred draw rate, reflecting what she described as a fiscally conservative posture on long-term state finances.

Myers agreed in principle but complicated the draw-rate discussion. Callan, the Permanent Fund’s consultant, recently presented data to Senate Finance showing that over the last 30 years, a 5% draw would have exceeded earnings-plus-inflation in 14 of those five-year windows. A 4.5% draw would have done so in 11 of 30. Better, but still a losing bet nearly four years in ten. Myers’s broader point was that the draw rate debate cannot be separated from what the earnings are being spent on, and whether government spending or private-sector deployment produces more durable growth.

Persily offered the structural obstacle. Any constitutional amendment requires a two-thirds majority in both chambers. Legislators who want the dividend in the constitution, he noted, will block any single-account amendment that does not also constitutionalize the PFD. Legislators opposed to constitutionalizing the PFD will block any package that includes it. Separating the fights, he suggested, is the only plausible path to the supermajorities required.

Rodell was the last to speak on the point. She has been consistent, she said, in advocating for a single-account structure since her time at the fund, and the proposal has come within one vote of reaching the ballot in recent years. She supported a constitutional spending rule, leaving the specific percentage to democratic debate. She noted that Texas operates at 6% on a 10-year average and continues to grow, and that New Mexico’s $17 billion floor demonstrates how downside protection can be built into a constitutional framework.

Education, and What the PFD Competes With

Katie Parrott, president of the Alaska Association of School Business Officials, asked the panel about the pattern of the last decade, in which education funding has been increasingly pitted against the dividend in annual appropriation fights.

Rodell offered a reframe worth preserving. The pitting, she argued, is partly a communications failure. In 2016, when Walker’s veto reduced the dividend, the state did not tell Alaskans what the redirected money was doing. It was simply not drawn. The alternative, she suggested, would have been to attach the redirected funds to a specific constitutional obligation, education, infrastructure, resource development, and tell that story clearly. That conversation was never had.

Stapp’s answer was more direct. Everything competes with the dividend, including programs he supports and programs he does not. He recounted a recent exchange with a constituent who demanded that a $7 million childcare appropriation not be reduced. Stapp’s reply was that the money was coming out of the constituent’s PFD, and asked the follow-up question he said no politician asks often enough. What will you cut, or who will you tax? He recounted a second constituent, in a precinct that votes for larger dividends, who asked him why his elementary school was closing if the legislature had taken the dividend to fund education. The question, Stapp suggested, was a completely rational thing to ask, and it indicated how badly the public has been served by elected officials who refuse to name tradeoffs.

Hall emphasized public messaging, noting that political will to be honest with voters has been in short supply for more than a decade. She referenced her colleague Rep. Sarah Hannan’s work on the Department of Corrections budget, which has expanded largely because of policy decisions made by the legislature itself, not because of growth in the department’s discretion.

Myers closed the exchange by reframing the education question as an outputs question rather than an inputs question. He used his own Fairbanks high school as illustration. Built in the 1970s for 850 students, expanded during his attendance to accommodate 1,300, it now enrolls roughly 850 again. The Fairbanks district has lost a third of its students in 25 years and has closed seven schools in the last five years. The binding question, Myers argued, is not how much to spend on public schools but why the working-age population is leaving. Without an economy that keeps families in the state, the per-student funding formula produces shrinking totals regardless of the per-student allocation. Within ten years, he predicted, the dividend-versus-education fight will be superseded by an education-versus-Medicaid fight.

What Lies Ahead

The forum ended without consensus, which was by design. But the shape of the disagreement is worth naming clearly.

On the architectural questions, the panel was close to aligned. A single-account structure, constitutional protection of the draw rate, and a draw rate lower than the current 5% all drew explicit support or qualified support from every speaker who addressed them. Rodell, with institutional experience at the fund, and Persily, with decades of observation, both indicated that this architectural consolidation has been within reach for years and is primarily blocked by the political package it gets bundled with.

On the dividend itself, the gap is real and unresolved. Hall would pause it until the state can afford both the dividend and its constitutional obligations. Myers would restructure the relationship between Alaskans and the resources, ideally so that earnings flow more directly into private economic activity rather than government appropriation. Stapp would preserve the dividend specifically because its removal, absent the other structural changes Myers described, would produce a worse equilibrium. Rodell and Persily both pointed, in different ways, to the communications failure that has made honest debate politically costly.

One editorial aside. The evening’s weight of argument tilted against the current dividend structure, but the frame of each critique was different. Hall’s was constitutional. Rodell’s was comparative. Myers’s was structural and economic. Stapp’s defense was political economy: without the dividend, the discipline function goes away, and Alaska becomes what he called a trust-fund state. These are not interchangeable positions, and they do not collapse into a single policy package.

The decisions ahead are not easy ones. A single-account amendment without a dividend amendment will face one kind of political coalition. An amendment that includes the dividend will face another. A pause, as Hall proposed, requires a legislature willing to absorb the political risk Hall acknowledged carries real cost. A preserved dividend, as Stapp argued, requires a legislature willing to name the tradeoffs that come with it. Every option on the table requires someone to tell Alaskans something they would rather not hear.

At the end of the Q&A, with more hands still up than time remaining, Rep. Stapp yielded his last minute to the audience and told Larry Persily he owed him $20 for the minute he’d bought earlier. Ross offered to pay. The room laughed. 

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This summary is a recap of the information presented. It is not an official record, transcript, or position statement. The content reflects only the views and statements made by the individual presenters and participants at the time of the forum. It should not be interpreted as representing the official views, opinions, policies, or positions of Commonwealth North, its leadership, board members, staff, or affiliates.