What to  Do with Oil Wealth?

Alaskans keenly awaited the completion of the pipeline. By 1975, the $900 million from the lease sales had been spent, and the state budget was once again short of revenue. However, once oil started flowing through the pipeline, companies would pay a production tax on every barrel of oil extracted from the leased land. It was obvious that this production tax would bring in large amounts of revenue for Alaska. But what should the state do with this new-found wealth? 

In the background of this discussion was the $900 windfall from the 1969 lease sales. While many saw the spending of those funds on infrastructure and social programs as necessary steps to improve the lives of Alaskan citizens, others felt the state had burned through nearly $1 billion in 5 years with little to show for it. Part of this discussion centered on the fact that oil is a non-renewable resource that will run out one day. Alaskans wanted to make sure the oil-generated wealth would be more than a short-term boon spent frivolously. They wanted to ensure that when oil production did eventually decline, the state would have something to show for it. 

Out of these discussions arose the unique Alaskan institution of the Permanent Fund. The goal of the fund was to take the proceeds from developing a limited, non-renewable resource and transform it into a permanent, sustainable source of wealth for future generations of Alaskans. This would be done by putting a portion of the oil revenues into a ‘permanent fund,’ where they would be out of reach from government spending and used to generate income into perpetuity. 

To direct these oil revenues into a fund that the legislature could not spend, the Alaska Constitution had to be amended. Placing the Permanent Fund in the state constitution had the added benefit of further protecting it. Changes to the constitution can only be made through an amendment approved by a majority vote of the people of Alaska. In the 1976 statewide general election, the constitutional amendment to create the Permanent Fun was approved by a margin of 75,588 to 38,518.

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