Jim Pugh
Guaranteed income programs in American cities have surged over the past year, rising to 82 participating cities across 29 states this year, up from from 11 participating cities in 2021. Among major cities piloting a basic income program are Denver, Chicago, Los Angeles and Oakland, Calif.
These guaranteed income programs provide some 26 million Americans in need a basic monthly payment, according to a report by Mayors for a Guaranteed Income, an advocacy group.
That group and other advocates are looking at a fund run by institutional investors as a model to emulate.
"There's a number of ways to pay for guaranteed income, from a sovereign wealth fund in which citizens benefit from shared national resources like the Alaska Permanent Fund," the mayors group's website says. The group did not return requests for comment.
In prior years, guaranteed income programs derived much of the funding from philanthropists, federal dollars from legislation such as the American Rescue Plan Act and money from state/city general funds.
"I have not heard of any guaranteed income (program) other than the Alaska Permanent Fund, which invests all over the place," said Mary Bogle, principal research associate at the Urban Institute, referencing Alaska's $73.7 billion institutionally managed portfolio used to provide dividends to state residents.
"They're (guaranteed income pilot programs) using CBOs, or community-based organizations, to recruit pilot participants," Ms. Bogle said."And every pilot is different in terms of what they're trying to get at."
Pools of capital managed by institutional investors that are used for common-good purposes are more common.
The Louisiana Education Quality Trust Fund manages $6.5 billion in investments across 30 portfolios according to its website. Investment income funds the state's board of regents and the Board of Elementary and Secondary Education. The trust fund has allocations in equities, fixed income and mutual funds.
Similarly, the $37.4 billion New Mexico State Investment Council, similar to Alaska, uses royalties and taxes from natural resources and public land to contribute to the state's budget, fund education and provide tax relief.
It's also set to distribute $1.1 billion to the state's general fund and other beneficiaries this year, according to its website.
"If these (guaranteed income pilot) programs are being put into place, particularly instances where you have a city or state that happens to have a large budget surplus at some point in time, then there can be a very strong argument at that point to be made that 'Hey, we should take this and turn it into a sovereign wealth fund,'" said Jim Pugh, co-director of the Universal Income Project, an advocacy group for guaranteed income programs.
The testing period is short. Mr. Pugh said that due to the pilot programs only lasting a year or longer to prove the effectiveness of guaranteed income, there hasn't yet been much discussion about using an underlying fund, like the Alaska Permanent Fund, as a model to fund itself full time. Some advocates of guaranteed income programs see the idea of a full-time program being implemented somewhere in the country as inevitable.
"A dual purpose part of it is continuing to build an evidence base around what impact it has on people's lives," Mr. Pugh said. "Part of it is just as a demonstration, a kind of proof of concept showing that 'oh, hey, this actually works.'"
Mr. Pugh said he believes the U.S. is just one or two years away from seeing its first full-time guaranteed income program in either a city or state.
"We are seeing currently elected leaders thinking through how they can make that transition from a demonstration or a pilot into a program that's going to be more long lasting for their residents," said Madeline Neighly, director of guaranteed income at the Economic Security Project.
The expansion of tax credits, such as the child tax credit under the American Rescue Plan, is an avenue that her organization advocates as a form of guaranteed income.
She believes a wealth fund could work for guaranteed income and referenced a report by the Economic Security Project that details how other states could take influence from Alaska and other wealth funds in general, especially to provide more funds to educational programs in states.
The report, "States Lead the Way," cites the Alaska Permanent Fund's popularity with residents as well as showing that 4 out of 5 Alaskan voters say the dividends make a difference in their lives.
California is implementing its own statewide guaranteed income pilot program, separate from the programs in cities such as Los Angeles, San Diego and Oakland.
The program was part of the state's fiscal year 2021-2022 budget and the state set aside $35 million from its general fund over five years.
"In the early stages of general research and development, various models, including the Alaska model, were researched," said Theresa Mier, a spokeswoman for the California Department of Social Services. The pilot is a one-time investment through, which the state seeks to learn more about guaranteed income, she said. There have been no official announcements, across all programs, made about programs becoming permanent beyond their pilot stages.
One obvious reason is that not all states and municipalities have the natural resources that Alaska or Louisiana do. Therefore, most cannot collect royalties in the same way to disperse as dividends.
One organization in favor of guaranteed income programs even points to a flaw within the Alaska model.
"The Alaska Permanent Fund Dividend reduces poverty but has increased income inequality over time," writes Sean Kline, associate director at the Stanford Basic Income Lab in his groups' booklet "Basic Income and Local Governments."
"One possible explanation is that higher-income households tend to use their dividend payments for long-term growth investments (e.g., housing, investment accounts, etc.) that are later cashed out as profits," Mr. Kline wrote.
However, the main difference between Alaska's Permanent Fund and guaranteed income pilot programs is that the latter tends not to give any funds to wealthier individuals.
