Alaska will dip into its cherished oil wealth fund to pay for state government operations for the first time since the fund was set up in the 1970s.
Gov. Bill Walker signed legislation on Wednesday allowing the state to use earnings from the $65 billion Alaska Permanent Fund to help pay the state’s bills.
The fund is famous for its annual dividend paid to nearly every adult and child in Alaska, but use of the fund for anything else has long been considered taboo.
However, Alaska’s oil-money fortunes have changed dramatically since the boom era. Oil production is only about a quarter of what it was during the late 1980s, and Alaska has no personal income tax or statewide sales tax.
Walker, an independent, said after the signing ceremony that Alaska had reached a “day of reckoning” after decades of relying almost entirely on oil royalties, taxes and fees.
“We knew at some point, our money makes more money than our resources,” he said. “We knew at some point we would have to make this shift”.
The legislation establishes a rule allowing the fund to be used like an endowment from July 1, with around 5 percent of market value available for general government use.
Since 1982, the fund has paid annual dividends to nearly every adult and child in the state, with yearly payouts that twice exceeded $2,000 per person.
In recent years that dividend - known as the Permanent Fund Dividend (PFD) - has dwindled and a budget veto by Walker in 2016 halved the payout to $1,022.
The decision to use the fund money prompted ratings agency Standard and Poor’s to raise its outlook for Alaska from negative to stable last week.
Walker’s political opponents, however, have seized on the issue.
“In 2016, Governor Walker broke Alaskans’ trust along with his campaign promise and cut your PFD in half with his veto. He took $1,100 from every man woman and child in our state,” Republican gubernatorial candidate Mike Dunleavy’s campaign website said on Wednesday.
Reporting by Yereth Rosen in Anchorage; Editing by Dan Whitcomb and Darren Schuettler