Opinion: The tradition we may not need

“How did this tradition get started? I’ll tell you. I don’t know. But it’s a tradition.”

— “Fiddler on the Roof”

Traditions are activities passed down with some meaning or significance. The thing about traditions is that they all have their origins in the past, and in the case of some of them, the issue that created the tradition no longer applies. And while some of them may still make sense — celebrating America’s independence with fireworks on the Fourth of July — some are obsolete and silly: like barristers in England wearing wigs, or graduates wearing stiff mortarboard hats. Some are done because they’ve always been done, and no one remembers the reason, like why only the Detroit Lions and Dallas Cowboys playing football every Thanksgiving.

Some traditions are dangerous. They can hold the world in stagnation when it needs to move forward. Think of Galileo rotting in jail because he said the Earth rotated around the sun. Or manifestations of some forms of sexism, just because it’s always been that way.

Alaska has its own traditions, like the Iditarod and Fur Rondy. One of them started in 1982. Between 1982 and 2016, Alaska paid Permanent Fund dividends out of the earnings because the earnings were not needed to fund essential government services. That all changed in 2016. Oil prices fell from $113 to $43 per barrel, and oil production had been falling for years, The earnings were needed to fund government.

All the other 49 states have an established stream of revenue that pays for public services. And these places are no different than Alaska. While Alaska has a stream of money from Permanent Fund earnings, these other places have streams from a broader diversified economic base. Any one of them could decide to take a portion of that stream, and instead of funding public services, just start sending out checks to everyone. Any of the states could do that, and none of them do. These places all have broad-based income or sales taxes. Even the progressive states understand there is not a tax base large enough and willing enough to raise taxes in order to pay dividends to everyone and fully fund public services.

So in 2016, Alaska became like any other state; it needed its recurring revenues, including the earnings, to pay its bills. It would have made no sense to continue paying dividends, other than because it had always done so, and yet it continued to do so, bankrolled by cutting public services and depleting the Budget Reserve Fund. Paying dividends had become a tradition, something you do because you’ve always done it, even though the reason is no longer clear.

New Mexico is now the second largest oil-producing state behind Texas. They, too, have saved and invested their oil wealth. Now their investment earnings exceed their personal income tax collections. They do not pay a dividend. They have used the money for education, child care subsidies, tuition-free college and trade school education, investments in social programs aimed at curbing crime and homelessness, mental health, and addiction treatment. Classroom sizes are shrinking. People are moving there rather than moving away.

It is common sense to the other states that once you start using your savings as an ATM for everyone, rich and poor, political opportunism will suck it dry. Efforts by some each year in Alaska to pay out the largest PFD possible have corrupted Alaska politics, threatened the vitality of the fund, and represents a selfish intergenerational money grab.

What’s bad about traditions is when they become excuses absolved from change, or even scrutiny, and a coercion against advancement.

Roger Marks is an economist in private practice in Anchorage. From 1983-2008 he was a senior economist with the Alaska Department of Revenue Tax Division.

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