ANCHORAGE (KTUU) Alaska policymakers face a dilemma.
The proposal that would put the biggest dent in the state's multi-billion dollar deficit -- reducing the size of Permanent Fund dividends and spending some of the fund's earnings to bankroll government -- would also have the undesirable side effect of raising the poverty rate.
A recent report from the Institute of Social and Economic Research detailed the relationship between the number of residents living below the federal poverty line and the size of the yearly payout to Alaskans.
"Our estimates show that the Alaska Permanent Fund dividend has lifted 15,000 to 25,000 Alaskans out of poverty annually, depending on the size of the dividend and the state of the economy," wrote Matthew Berman, a University of Alaska Anchorage economics professor.
Dividends have played an especially important role in mitigating poverty among Alaska Natives, according to the study, and one-third more Natives would have fallen below the poverty threshold otherwise.
Sen. Bill Wielechowski, D-Anchorage, is suing Gov. Bill Walker for his proposal to use Permanent Fund earnings to help pay for government, arguing that the plan is unconstitutional. Alternatively, he advocates an overhaul of the oil and gas tax credit system before other measures taking aim at the budget deficit move forward.
He said in an interview that Berman's report underscores an important reality: "it really is the most vulnerable people in the state -- kids, seniors, and people living in economically depressed areas -- are really impacted by cuts to the Permanent Fund."
However, supporters of the restructure point out that if nothing changes about how state government is financed, the savings account used to pay dividends will be depleted within just a few years.
"The PFD restructure assures people a dividend, whereas if you don't do it ... you're assuring them that they're going to go into the poverty level," said Senate President Kevin Meyer, R-Anchorage, who was among those to vote for the plan earlier this year.
If spending remains similar to what it is this year and no new revenue sources are approved, the Permanent Fund earnings reserve will be depleted within two or three years. Meyer also said that, if the effect of reducing dividends increases the poverty rate, eliminating it permanently would obviously be worse for the economy.