Hammond's Permanent Fund Dividend plan would have never lasted

The name of the late Gov. Jay Hammond is invoked on a constant basis by all those who claim to speak with authority about the Alaska Permanent Fund Dividend.

As the father of the dividend, the program that continues to do more than any other to unite and divide Alaskans, Hammond was tireless in promoting his vision that the state should share some of its nonrenewable resources with residents. He became the most popular ex-governor in Alaska largely because of his identification with the annual redistribution of oil wealth.

He also had a language all of his own—Hammondese—charisma and a sense of humor. He liked to tell the story of the man who offered effusive praise for Hammond’s wisdom and then said, “Gee, it’s been really great to meet you Wally.”

One thing that gets lost in the Hammond hosannas is clear in retrospect: the distribution plan he championed in 1980 would never have survived even if the U.S. Supreme Court had not declared it unconstitutional 37 years ago Friday.

The unfair treatment at the heart of the dividend formula would have created bitter political divisions in Alaska and led to a change in the formula, driven by transience and population turnover. The impossibility of the Hammond plan would have become more obvious as the disparity grew each year between new arrivals and older residents.

Under the 1980 law, a one-year resident would qualify for a $50 dividend, while someone who had been in Alaska since the first day of statehood in 1959 would have collected $1,050.

Had the original program survived, the largest dividend recipients now would be collecting 60 times more than a one-year resident. It would be politically impossible for elected officials to defend that system, given that the majority of residents would be collecting far less than the maximum.

“From today’s perspective, it’s easy to see the mistake in creating permanent us-and-them divisions among Alaskans based on when they arrived, but at the time these residency requirements had strong public support,” Dave Rose, first executive director of the Alaska Permanent Fund, wrote in an “as told to” autobiography with Charles Wohlforth.

“Saving for the Future” was published in 2008, when the largest recipient under the original Hammond plan would have collected a mere 600 times more in dividends than the person who had been in Alaska for one month.

The idea of judging merit based on years of residency still exists in Alaska today, but it was far more prevalent in Alaska in the early 1980s following the turmoil of the trans-Alaska pipeline construction years.

We can be thankful that the dividend disparity never evolved into a point of contention. The Supreme Court did Hammond a big favor by stopping it, though he hardly saw it that way at the time.

“If you detect some sadness in my eye, you’re very correct,” Hammond told reporters after the court ruling on June 14, 1982. “It’s been something like 15 years of an ardent effort to espouse a program I think has gone a long way to preclude the state from making the same mistakes made by virtually every state and nation dependent on oil.”

He soon signed the backup bill approved earlier that month by the Legislature. That bill contained contingency language that more or less set up the dividend program that remains in place today.

By an 8-1 vote, the court struck down the plan to base the amount paid in dividends to Alaskans on the length of residency, saying the scheme violated the equal protection clause. The court said that the law would divide people into an ever-expanding number of classes.

There was and is no doubt that the Hammond plan was to create separate classes of citizens, rewarding seniority. The court said this was not a legitimate use of public resources.

“Alaska has shown no valid state interests which are rationally served by the distinction it makes between citizens who established residence before 1959 and those who have become residents since then,” wrote Chief Justice Warren Burger.

Anchorage attorneys Ron and Penny Zobel had gone to court, arguing that the state was trying to create a permanent group of second-class citizens. They were mercilessly attacked for their decision to go to court, and faced death threats and hate mail.

They were right, while Hammond and the Legislature were wrong. The long-term impracticality of the sliding scale wasn’t as obvious in 1980 as it should have been.