Financial returns have been less than needed to keep the fund’s spendable account full, potentially endangering the state budget
By James Brooks, Alaska BeaconThe Alaska Permanent Fund Corporation offices in downtown Juneau, photographed on Monday, Nov. 14, 2022.
The worst-case scenario isn’t certain, but “I would say we’re starting the bad journey,” said Craig Richards, a member of the Permanent Fund Corp.’s board of trustees. At the start, the Permanent Fund’s creators knew there was a drawback to this approach. Unless the Legislature regularly transfers money from the earnings reserve to the principal, inflation will wear away the principal’s value.
Lawmakers occasionally canceled the annual inflation-proofing payments in order to save money in the earnings reserve for the Permanent Fund dividend, but they always resumed. The same thing could happen again when the Legislature convenes in 2024, reducing the chances that the spendable account will run out of money soon — but it also creates a long-term problem.
“We’ve got to keep track of inflation, or you slowly erode your Permanent Fund. So you can skip or lighten up a year if you want. But you’ve got to keep up in the long run,” said Sen. Bert Stedman, R-Sitka and co-chair of the Senate Finance Committee.Sen. Bert Stedman speaks at a news conference held in spring 2023 by the Senate majority caucus.
“It’s the most difficult to achieve, but it’s the most durable solution,” said Deven Mitchell, who leads the Alaska Permanent Fund Corp on a day-to-day basis as its executive director. “I think that’s a challenge in the political environment. All things involving the Permanent Fund are thrown into the bucket and talked about at the same time,” Stedman said.
But because reducing the transfer would mean reducing the amount of money available for dividends and services, that’s not likely to happen.The Legislature could also take an approach like New Mexico. When oil prices spiked in 2022 after the Russian invasion of Ukraine, that state’s legislators deposited $8 billion into the state’s various permanent funds, saving it for the future.
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