Sen. Robert Myers: Has the Permanent Fund turned Alaska government into a trust fund kid?

By SEN. ROBERT MYERS

Oct. 7, 2026 – The Permanent Fund Dividend came out last week at $1,200: $1,000 for the dividend and $200 for the “energy relief” payment.

Yet again, it was not the statutory amount, which should have been about $3800. It was also not the POMV 50/50 that the Legislature discussed moving to in 2021 as part of a full fiscal plan, which would have been $2964. It wasn’t even the POMV 25/75 plan that the Senate leadership assured us was sustainable just a couple of years ago, which would have been $1482 (before any energy relief payment).

As most long-time residents will remember, the PFD was first cut by Governor Walker in 2016. He said that we would need it soon to spend on government. After cutting the PFD in 2016 and 2017, the Legislature passed a plan to start using earnings from the Permanent Fund to pay for government using the POMV draw model in 2018. Over the last few years, not counting federal funds, the draw from the Permanent Fund has accounted for between 60-65% of the money used to pay for government. Oil has accounted for around another quarter of our revenue. The last 10-15% has come from other sources that haven’t changed much over the last couple of decades (fisheries taxes, non-oil corporate taxes, gas tax, cigarette tax, etc).

While it’s easy to sit there and do the math on how much money the state uses and where it comes from, the question that we haven’t asked in the last decade is a simple one. Was it a good idea to start using investment income as the primary revenue source for state government? It’s easy to talk about how cutting the PFD is the most regressive tax ever created. Or we can talk about how it pulls $1.5 to $1.8 billion from the state’s economy every year. Or we could talk about the damaging political effects when the people stop expecting the legislature to follow its own laws.

But aside from the dividend check itself, what we haven’t talked about is the political and economic effects of using passive investment income as the primary source for government revenue. I’ve talked about it in abstract terms in the past, referencing the incentives created by different revenue sources for government. Doing so separates public officials from the private economy where most of us live and work, a problem begun by using oil as our primary revenue source. But we need to talk about some concrete examples of how using the Permanent Fund for government spending has changed the political and economic landscape.

The point here is that spending Permanent Fund earnings has much broader implications than just an individual check. Even if the dividend didn’t exist, is it a good idea to use an investment account for government spending? What happens when we do? After ten years of cutting the dividend and eight years of spending it on government, where do we stand? I want to examine the effects of spending the Permanent Fund on government on three policies that we’ve been debating for the last few years: defined benefits, the gas line project, and education spending and policy.

As a quick reminder, Alaska switched its state employee retirement plan from a defined benefit (pension) plan in 2006 after changing demographics and some bad investments caused the previous plan to lose its fiscal stability. The Legislature instituted a defined contribution plan (401(k)-style plus annuity) instead. The state employee unions, and the Democratic Party in general, have been pushing to go back to a defined benefits plan ever since. The DB plan was included in various bills and floor amendments every year since the switch was made, but it gained no serious traction until 2021. That was the first year that a defined benefits system passed a body (the House) of the state legislature. The Senate passed a version in 2024, and both bodies passed a version this year, which was vetoed by the governor.

So what changed? We started spending the Permanent Fund on government. We figured out over the last forty years that oil is a highly unstable revenue source, completely unsuitable for an inflexible and growing expense like a pension plan. But investment earnings are much more stable (although not as stable as some other income streams) and large enough to fund the system. Using the Permanent Fund was the key to providing the funding source needed to make a return to a pension plan look viable. The interesting part is that we have some legislators who are fine with cutting the dividend and using the Permanent Fund for government but are against the defined benefits plan. They don’t seem to realize that they are enabling the very thing that they oppose.

The availability of the Permanent Fund for government also affected the gas line debate. The debates this past year over it were highly illuminating.

Most people in the state look at the gas line as either a source of energy that would finally provide some relief from high prices once exports started or as an economic driver from building and running the system or the other industries that having a large source of natural gas could unlock. But some in the legislature look at the project very differently. They want to know how much we could extract from it through taxes. Or they want to know how much building it would cost the state in terms of extra police, kids in school, etc. There is nothing wrong with these questions, and we should get a handle on those answers, but, interestingly, those became the overriding concerns rather than the economic impact of the project, either during construction or after completion.

But we should have expected that. The legislature already has a stable source of revenue in the Permanent Fund that is not connected to the state’s economy. Increased economic activity in general leads to higher state spending. It means more road maintenance, more kids in school (if workers move here permanently), and more public safety spending for when people do stupid things on Friday night.

Most states accept this tradeoff because the increased activity also means more tax revenue to pay for it all. But that’s not true for us because we don’t have a broad-based tax to collect revenue from general economic activity. That makes our legislature much more skeptical of economic activity. The only revenue we get from the gas line is what tax the line directly or what we get from selling the gas.

For example, if the new gas source allowed us to reopen the fertilizer plant in Nikiski instead of just exporting the gas, the state wouldn’t get anything from it even though it could employ lots of people and be an economic driver for years to come. But the Kenai Peninsula Borough would get property tax revenue from the plant and the workers’ homes and sales tax revenue from the workers’ salaries being spent in the area. Not surprisingly, they want the line to be built and the plant to reopen. The legislature doesn’t appear to be as enthusiastic.

To be sure, we can’t know the motives of every individual legislator, and there were a lot of other factors at play during this last session: animosity between the governor and the legislature, skepticism of the project economics, an interest in converting to wind and solar energy instead of natural gas, etc. But we know that having a revenue source completely disconnected from the state’s economy played a part because there were comments made about it, especially in the Senate. There were comments about not getting enough money from the project, lots of costs to the state, and concern that costs would come in before revenue would arrive.

In short, having the Permanent Fund available to spend was not the only factor in letting the legislature refuse to create a stable tax structure to allow the project to get financing. But the Permanent Fund gave the state the financial freedom it needed in order to say no. The state has a stable revenue source in the Permanent Fund, and it is not anxious for more, especially if it comes with uncertain costs. The problem is that the revenue source does not change in proportion to economic activity or population, giving the state an incentive to fight against economic and population growth.

If the state doesn’t want a stronger economy, how does it feel about some of the factors that could get us to one? We’ve had a lot of debate over the last few years over education funding, and, when the incentives are aligned, a quality education system that creates good results is a strong contributor to a growing economy. Simply put, educated workers are more productive.

But our incentives are not aligned properly, mostly because of how our government is funded. The debate over the last few years has largely aligned between those who want to fund a system and those who want to educate kids; in other words, the debate is between inputs and results. But here is the big question that we haven’t asked: does the state have an incentive to have an educated population and care about results in the first place?

Most state governments want a quality education because an educated population, in general, leads to a stronger economy, which leads to more tax revenue. But Alaska doesn’t have that. We have largely disconnected economic activity from tax revenue. The state has an incentive to want less economic activity, not more. Why would the state want kids to actually get educated if the state doesn’t see a benefit from it?

What do politicians want to see? They want to look like they care because that gets them reelected. So they will fight for more education spending because spending appears to equate to caring, but it does not necessarily equate to results. Education is no longer an investment with a big payout far into the future but an expenditure on conspicuous consumption.

For some jobs, such as medicine or engineering, we definitely need some highly educated people. But growing those professions organically means that we have to spend a lot of effort through both money and policy to educate the whole population. After all, we don’t know when kids are in elementary school which ones will be our future doctors or drilling engineers.

We’re used to importing people from Outside anyway, so it’s much easier from the state’s perspective to continue to do that rather than spending the effort to create the right policies and environment to actually create a well-educated population. Since educating the population as a whole won’t benefit the state in terms of tax revenue in the long run anyway, why bother? A well-funded system that produces poor results but creates loyal voters is the logical result.

The simple fact is that the debate from 2016 to 2018 over spending the Permanent Fund on government was too shallow. We talked about comments made at the creation of the Permanent Fund. We talked about how the state could get more money at the least political cost. But we didn’t talk about how different revenue models would give the state different incentives for behavior later on. We all expect that a 20-something who works for a living will behave differently than a 20-something who makes his money from a trust fund, even if their income is the same in dollar figures.

Why haven’t we applied that same principle to government? We need to come to terms with that principle if we want to turn our economy around and give people enough hope for the long term to reverse our working-age out-migration.

Senator Robert Myers was born in Fairbanks and spent much of his young childhood at the Salchaket Roadhouse, owned by his parents. He attended the University of Alaska Fairbanks, where he studied philosophy, political science, and history. While in college, he drove for a tour company, sharing  Alaska with countless visitors. He currently drives truck and travels the Dalton Highway (Haul Road) frequently. He ran for office because he wants an Alaska his children will choose to make their home down the road. When not working for his Senate District B, North Pole, he enjoys reading, history, board games, and spending time with his wife Dawna and his five kids.