What happened when Jay Hammond started thinking of other ways to share the gifts of nature
When former governor Jay Hammond, who died last August, became involved in Alaska politics in the sixties, he lived in the treeless, windswept fishing village of Naknek. He had noticed that most of the wealth from the local fishery was reaped by outsiders. Billions of dollars were being extracted, while Alaska’s coastal communities remained little more than slums.
When he was elected governor as an independent (he later became a Republican) in 1974, oil was starting to flow from Prudhoe Bay. The wells were located on land that had been granted to the state by the federal government. This meant Alaska would be rich—especially since OPEC had just pushed oil prices sky-high. The question was, what should the state do with its windfall?
After hot political battles it was decided that 25 percent of the state’s oil revenue would be invested in a portfolio of stocks and bonds that would outlive Prudhoe Bay’s oil supply. Annual earning from this portfolio would again be divided in half. Fifty percent would go for schools, highways and other infrastructure. The rest would be paid out in dividends to shareholders. Children’s dividends would be held in interest-bearing accounts until they reached age 18.
The first dividend of the Alaska Permanent Fund was $1,000, an amount that reflected income that had built up during the period when the idea was being challenged in the courts. In 1984 the dividend dropped to $331. In 2000, it hit a high of $2,222; last year, mainly because of current economic influences on investment returns, payouts totalled $864. If you look around the world at other oil-rich regions—from Saudi Arabia to Texas—a case can be made that none has handled its wealth better than Alaska.
Today the Alaska Permanent Fund manages a portfolio worth over $30 billion, making it one of the 100 largest investment funds in the world. Its official mission is “to produce income to benefit all generations of Alaskans.” When state legislators tried to raid the fund in 1999 to offset a budget deficit, voters in a referendum stopped them with a 83-percent majority. The voter’s message was clear: Don’t touch our money!
Excerpted from the book Who Owns the Sky: Our Common Assets and the Future of Capitalism (Island Press, 2001) by Peter Barnes, co-founder of the company Working Assets.
