Bull feathers, Jay Hammond and the purpose of the Permanent Fund
Not since he served as a two-term governor of Alaska has the name of Jay S. Hammond been so much in the news.
The references to him are often prefaced with some form of, “As Jay Hammond said about the Permanent Fund . . . ”
The current governor, his staff and most of the legislators who purport to quote chapter and verse from the Book of Jay weren’t around in 1974-82 when Hammond occupied the governor’s mansion.
When Mike Dunleavy was still in Scranton, Hammond was a Republican during an era in which the Hickel wing of the party had real clout, but Hammond drew support from a coalition of Republicans, independents and Democrats.
The trouble about quoting Hammond and treating his words as scripture is that he contradicted himself on some key points—namely the original purpose of the fund and the percentage that should be paid for dividends.
Some Permanent Fund pontificators cite a Hammond quote from an extensive interview my twin brother did with him in 2004. They say the Permanent Fund was not established in 1976 to put away money to fund government when oil revenues declined.
“I hear people say, ‘original intent of the Permanent Fund was rainy day account.’ Bull feathers, that word was never even mentioned back then, to my knowledge,” Hammond said in 2004.
In the immortal words of Jay Hammond, “Bull feathers.”
The pro-amendment statement printed in the 1976 election pamphlet, written by the Alaska Chamber of Commerce, called the proposed Permanent Fund a “rainy day fund to benefit this and future generations of Alaskans.”
"Just as a wise and prudent family sets aside money in a savings account for the future, so should Alaska's state government set aside a rainy day fund to benefit this and future generations of Alaska," the chamber said 45 years ago.
Then there was a newspaper column, printed in newspapers across the state just before the 1976 vote, written by the leading proponent of the fund.
“Leaving all our resource dollars in the politicians’ purview to spend as they see fit for bigger government, instead of socking some away in savings for the future, would be like assuming there is no need to put away cash for rainy days,” wrote Gov. Jay Hammond.
So yes, the rainy day argument was a real part of the debate in 1976.
As Gregg Erickson and Cliff Groh wrote in an excellent history of how the Permanent Fund and the dividend were created, Hammond’s statements were not always consistent on the purpose of the Permanent Fund.
He did mention the possibility of dividends or a state Social Security program before the election to reporters. But the dividend debate was never front and center.
In 1976, a legislative report by Reps. Hugh Malone and Terry Gardiner, both supporters of the dividend concept, mentioned cash payments to residents as a potential use of fund earnings.
“As far as we have been able to determine, that was the first and only mention in an official legislative document, of the possibility of paying dividends from APF (Alaska Permanent Fund) earnings before the public vote on the fund’s creation,” Erickson and Groh wrote in their study.
“Until the voters approved the constitutional amendment creating the APF, supporters of a resource-based dividend found it expedient to broach the idea of a dividend as an aside, an afterthought, or a remote possibility,” Erickson and Groh said.
Alaska voters approved the amendment on a two-to-one vote. I had finished most of my college work at the University of Alaska at the time and had just started working as a local government reporter for the Fairbanks Daily News-Miner.
Everyone I talked to before that election voted for the amendment. I never heard any discussion of using the fund as a means of distributing cash. That discussion was probably limited to government insiders with a radical vision for redistributing wealth. What I remember is that this was all about setting aside money for Alaska’s future, when oil revenues declined.
In one sense, it was an easy decision for the voters in 1976 to create the Permanent Fund.
The state bonanza was not yet in hand, as the pipeline had not been completed and the boom in state income that followed the Iranian revolution was three years in the future. It is easy to promise yourself to be prudent, if and when big money arrives, when it has yet to arrive.
Most Alaskans had no interest in a cash distribution scheme back then and would have attacked it as a socialist scheme that no real conservative would support. This was true even after the 1976 vote.
“A survey conducted in 1977, commissioned by the Alaska State Senate Permament Fund Committee asked how the APF should be used. The option of cash ‘distribution in the form of dividends and revenue sharing for Alaska residents’ ranked 19th out of 22 priorities,” Erickson and Groh wrote.
Hammond’s first proposal for cash distributions, which he made in his second term, only appeared after the voters had amended the Constitution and created the Permanent Fund.
In 1979, Hammond wrote to his friend Sen. Clem Tillion that allocating 25 percent of the net earnings of the fund was the least he would accept. He had also proposed that half of the fund’s earnings should be paid out to Alaskans.
When he offered the 50/50 plan, under his so-called “Alaska, Inc.” proposals, he said the half not paid out in dividends would go to the regular budget.
With legislators meeting in special session, it is important to remember that the history of the fund and the dividend is nowhere near as clearcut as the governor and his allies claim. The truth is complex and reflects a history of compromise. Dunleavy’s simplistic political jabber about dividends past and present is an attempt to shortchange the future to get reelected.
The Senate Finance Committee looked at the question of “what ifs” the other day in regard to the Pemament Fund, its annual payout and the size of the account,
The most striking finding is this one: Had Alaska governors and legislators, from Hammond’s time until now, followed the constitution and the statutes and the idea about spending half of the earnings on government, the fund today would contain $29 billion, not $82 billion.
The earnings did not get spent on government for many reasons. Hammond, who was far more popular as an ex-governor than as a governor, did more than anyone to create the political environment to retain the earnings.
Governors who followed him and generations of legislators and voters who chose them could have acted to save more over the past 45 years. No question about that.
But longstanding practices and policies have also left us with tens of billions in added savings not recognized by the 50/50 crowd. The Permanent Fund could keep taxes low permanently and preserve state services, if we act wisely and ignore the Dunleavy desire to overspend billions.
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