Alaska Spending Blueprint Drops Residents’ Oil Dividend by 38%, Gives No Direct Virus Aid

Base cause: The state’s sovereign wealth fund dropped 10% last month, as oil prices plummeted in the coronavirus crash. 

No coronavirus-related direct payments and a cut in the oil-fed dividend that all Alaskans receive, by more than a third. These controversial positions in the state budget plan, just passed by the Alaska legislature, have drawn fire from critics, including the state’s governor.

Over the weekend, the state House and Senate approved a $4.5 billion budget for the next year, which includes a $680 million allocation to the Permanent Fund, the state’s sovereign wealth fund, to be paid directly to Alaskans months from now in October.  

But on Sunday, Gov. Mike Dunleavy sharply criticized the budget, which he said neglected the advice of most leading economists to immediately deliver direct fiscal relief to the people impacted by the COVID-19 pandemic. The budget is next headed to Dunleavy, who has 15 days to act on the bill, excluding Sundays. 

“It would appear lawmakers missed the opportunity to create a cash infusion from the earnings reserve account into the hands of Alaskans, like hairdressers and restaurant workers, that could have happened in as little as two weeks,” he said in a statement. 

“I am quite frankly puzzled why they would not do that,” Dunleavy added. 

Lawmakers squabbled about how to pay for extra items. The state House, in which neither party has a clear majority, settled on this approach. Lawmakers indicated they will return later to look at what other financial help they can give. The Senate and the governorship are Republican-controlled.

The state has allocated $75 million from the budget reserve fund to the Department of Health and Social Services to respond to the public health crisis over the next year, as well as another $5 million to the disaster relief fund. The proposal also includes $1 billion to guard the Permanent Fund against inflation.

State governments are contending with the coronavirus pandemic as they draw up their budgets for the next fiscal year. On Friday, the federal government passed the largest emergency relief package in history that is promised to deliver $1,200 checks to millions of Americans as unemployment rates spike across the country. By summer, up to 14 million Americans could lose their jobs, according to the Economic Policy Institute.  

Alaska similarly is dealing with the economic fallout. The reversal of fortune has been swift. As recently as January, the state reported a 6.1% jobless rate. The figure was a record low for the state, though still behind the national average at the time, which stood at 3.6%. 

Now, thousands of people in the oil-heavy state have lost their jobs in the past month, including about 8,200 Alaskans in the week ending March 21. That represents a jump from 1,100 the week prior, according to government data. Alaska had declared a state of emergency on March 11. 

Alaskans also receive an annual dividend from the Permanent Fund, which has doled out payments from the state’s oil revenues since 1980. But the payment, which arrives in October, is down to $1,000 per applicant, about 38% less than the $1,600 checks delivered to state residents last year. It’s the smallest amount to be paid to Alaskans since 2013 when it was $900. 

The state has gained notice in the past year as a case study for “universal basic income,” a minimum guaranteed payment by the government to cover the basic cost of living needs. It won some attention in the rest of the US after former Democratic candidate Andrew Yang, an entrepreneur, promoted the idea.

But the state’s oil reserves have taken a hit in the past month, thanks to plummeting oil prices, which sent the price of gas to dip below $1 in some states. As of March 16, the value of the Permanent Fund has fallen to $58.7 billion, down 10% from $64.9 billion last month. 

“Through the extreme market volatility prevailing in markets for the past several weeks, the APFC portfolio has held up well,” Marcus Frampton, chief investment officer at the Alaska Permanent Fund Corporation (APFC), said in a statement at the time. 

Frampton said the portfolio benefited from an overweight position in cash and fixed income, resulting in “very strong relative performance and enviable levels of dry powder to deploy into investment opportunities.”


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