Children and Alaska's Permanent Fund Dividend: Reasons for Rethinking Parental Duty

• Publication year: 2017

§ 34 Alaska L. Rev. 85. CHILDREN AND ALASKA'S PERMANENT FUND DIVIDEND: REASONS FOR RETHINKING PARENTAL DUTY

Alaska Law Review
Volume 34, No. 1, June 2017
Cited: 34 Alaska L. Rev. 85

CHILDREN AND ALASKA'S PERMANENT FUND DIVIDEND: REASONS FOR RETHINKING PARENTAL DUTY

Eli Kozminsky ^[*]

ABSTRACT

Alaska's Permanent Fund Dividend (Dividend) is an annual payment to eligible residents derived from state investment earnings on mineral royalties. Since 1982, the Dividend has averaged a payout of approximately $1,000 annually. The Permanent Fund Dividend program allows a parent, guardian, or other authorized representative to claim a Dividend on behalf of a child. Yet Alaska law currently imposes no requirements whatsoever on how parents use a child's Dividend. This Note questions Alaska's lack of parental duty when it comes to managing children's Dividends. Part I sketches the Permanent Fund Dividend's history and motivations, the mechanics of the program itself, and the case law that has developed regarding parental duty under the program. Part II then proposes that the way in which a child's Dividend is characterized influences what sort of parental duty (if any) attaches. In Part III, a reinterpretation of the Dividend as income rightly belonging to the child is offered as a compelling alternative to current doctrine. This Note concludes that the lax treatment of a child's Dividend under current Alaska law is suspect, and argues that an income conception that imputes a higher degree of parental duty better advances the program's aims.

INTRODUCTION

Every year Alaskans "get money just for living." ^[1] More specifically, Alaska's Permanent Fund Dividend (Dividend) is an annual payment to eligible residents derived from state investment earnings on mineral royalties. ^[2] Since its present-day inception in 1982, the Dividend has averaged a payout of approximately $1,000 annually. ^[3] Without adjusting for inflation, 2015 witnessed a new peak Dividend of $2,072. ^[4] That year there were 672,741 valid applications for the Dividend, ^[5] aggregating to a total disbursement of over $1.2 billion. ^[6] Of these valid applicants (and ultimately recipients), 176,831 were children under the age of eighteen- equaling 26.29% of 2015 recipients. ^[7] Translated into dollar terms, children received over $360 million in Dividend payouts in 2015. ^[8] Not surprisingly, the Permanent Fund Dividend program allows a parent, guardian, or other authorized representative to claim a Dividend on behalf of a child. ^[9]

Yet Alaska law currently imposes no requirements whatsoever on how parents use a child's Dividend. ^[10] As of now, parents have no duty to spend or invest these funds wisely or even ostensibly in the child's interest. Hypothetically, nothing prevents a parent from squandering a child's annual payout "on everything from alcohol to trips to Hawaii." ^[11] Hence, when it comes to parents claiming Dividends on behalf of children, the program has been branded "ripe for abuse." ^[12]

This Note questions Alaska's lack of parental duty when it comes to managing children's Dividends. Part I sketches the Permanent Fund Dividend's history and motivations, the mechanics of the program itself, and the case law that has developed with respect to parental duty under the program. Part II then proposes that the way in which a child's Dividend is characterized influences what sort of parental duty (if any) attaches. Competing interpretations of the Dividend as a credit (as it is treated now), welfare benefit, or child's income are suggested in turn, analyzing for various strengths, weaknesses, and ramifications of these understandings. In Part III, the last of these characterizations-the Dividend as income rightly belonging to the child-is offered as a compelling alternative to current doctrine. This Note concludes that the present treatment of a child's Dividend, merely as a credit accompanied by zero parental duty, is suspect, and argues that an income conception that imputes a higher degree of parental duty better advances the program's aims.

I. Alaska's Permanent Fund Dividend Program

A. History

The Permanent Fund Dividend was the product of a long-running debate over the use of the Alaska Permanent Fund (APF). ^[13] The fund had been incorporated into the Alaska Constitution in 1976, creating an endowment derived from state mineral royalties that operates to this day. ^[14] When the fund began, it was used as both an investment vehicle and as a source of capital for large-scale development projects. ^[15] Skeptical of concentrating this resource wealth in the government's hands, though, then-Governor Jay Hammond spearheaded legislation in 1980 to redirect the APF from large-scale development projects into the hands of Alaska residents in the form of a dividend from the fund. ^[16]

Convinced that "the money could be used better by individuals than spent on government programs or invested in development projects," the initial bill Governor Hammond guided through the legislature set the first Dividend payment at fifty dollars to each citizen eighteen years of age or older. ^[17] The bill also retroactively conferred on each adult one Dividend per year of residency since 1959 (the year of Alaska statehood). ^[18] In 1982, however, the United States Supreme Court in Zobel v. Williams ^[19] struck down this "retrospective aspect" of the program." ^[20] The aspect violated the Equal Protection Clause of the Fourteenth Amendment because it unconstitutionally "favor[ed] established residents over new residents."(fn21)Also, whereas the original program was available only to adults, ^[22] today children are also eligible. ^[23]

As Governor Hammond's skepticism implied, one of the motivations behind the Dividend's enactment was an anti-paternalist disposition in Alaska towards government spending. Not only would APF returns be devolved from state projects to Alaska residents, this money would come with no strings attached. Early supporters of the Dividend argued that if the program's objective was to provide benefits for all Alaskans, "there was no better way than to give them cash so they could decide for themselves what to spend it on rather than leaving that decision to the government." ^[24] However, this laissez-faire approach did reportedly temper support for the program in the Alaska legislature, where some feared recipients would spend much of the Dividend unwisely. ^[25]

Another related motivation behind the program was the desire to enact a more hands-off substitute for state welfare programs. Again, Governor Hammond, the Dividend's founding father of sorts, believed that APF returns were better spent by individuals than on government programs. ^[26] Today, the Dividend continues to provide "an important source of income for some Alaskans, particularly those in rural Alaska." ^[27] This is moreover true for "cash-poor rural Alaskans," for whom the money supplies a yearly injection of liquidity. ^[28] The day following its annual payout has even been referred to by some as "Early Christmas." ^[29]

A final impetus behind the Dividend program was the notion, attributed to former Governor Wally Hickel, of Alaska as an "Owner State." ^[30] Because much of Alaska's natural wealth is owned by the state government, especially the land where the state's oil and mineral wealth is largely produced, the basic idea is that the residents who "own" or control these resources have a corresponding obligation to develop those resources for the benefit of all Alaskans. ^[31] In the same vein, no less than the Alaska Constitution further mandates that the legislature utilizes, develops, and conserves the state's natural resources "for the maximum benefit of its people." ^[32]

Consonant with this owner state ethic, then, when Governor Hammond originally proposed the Dividend, it was in his view "a means of ensuring that everyone benefitted from oil production on state-owned lands." ^[33] Thus, following the program's enactment, the APF would be managed as "an investment fund for the future," with its income distributed over the long term as dividends, rather than used as a development bank to "force-feed" Alaska's economy in the short term. ^[34] In this sense, the dual impulses of anti-paternalism and an owner state ethic dovetailed with the Dividend itself: the program provided a way of sharing the state's communal natural wealth, without the threat of governmental misappropriation of these funds or micromanagement over their ultimate private use.

Out of these foundational and sometimes overlapping motivations among Alaskan lawmakers and citizens-anti-paternalism, welfare substitution, an owner state ethic-emerged the Dividend program as it exists today. It is worth noting that, "[b]y nearly all accounts, the [Dividend] has been a success and followed through on the constitutional promise to use Alaska's natural resources for the greater good . . . ." ^[35] The next section examines the mechanics of how this program is currently implemented, with special attention paid to the administration of Dividends to child recipients.

B. Mechanics

Funds for the Dividend are supplied by the APF described above. ^[36] The APF is in turn managed by the Alaska Permanent Fund Corporation, a state-owned corporation. ^[37] Although capital for the APF is supplied by mineral royalties, investments are allocated across a broad spectrum of assets. ^[38] So while it is theoretically possible for the APF to have zero...