Continuing the Alaska Perman-ent Fund Corp. board of trustees' campaign for a percent of market value (POMV) spending formula, one board member told the Kenai Rotary Club on Monday that at $27.6 billion in assets, the fund is in healthy shape.
"In his state of the state address, the governor said permanent fund income now exceeds oil revenues and will continue to do so going forward," said trustee Eric Wohlforth.
"The fund is in healthy shape and is well diversified with a firm 10 percent in real estate," he said.
Wohlforth told area Rotarians that the market value of the permanent fund at the end of 2003 was $27,539,400,000, and as of Mon-day, it was at $27.7 billion.
However, Wohlforth noted that Gov. Frank Murkowski also said the health of the state's essential public services is being eroded and the fund trustee hypothetically asked how long Alaskans should allow the fund to grow while public services decline.
That and other questions involving the permanent fund are to be addressed at a Conference of Alas-kans on Feb. 10 to 12 in Fairbanks, according to Wohlforth, who told the Kenai group that he and 11 others appointed by Murkowski will select 44 additional delegates in hopes of developing a consensus on how to solve the state's looming fiscal problems.
"We will try to seek a cross section of all Alaskans to produce a solution," Wohlforth said.
Questions the conference will attempt to answer include whether the use of income from the permanent fund should be limited by the state constitution to 5 percent of the fund's value; whether a portion of the income of the fund should be used for essential state services such as education; whether use of the fund income for permanent fund dividends should continue to be determined annually by the Legislature or if it should be spelled out in the Constitution; and whether the state should maintain a minimum balance in the Constitutional Budget Reserve to stabilize state finances against fluctuations in oil production and oil prices.
Wohlforth explained the board of trustees' percent of market value proposal as being a formula that limits spending to a set percent of the fund's total market value a combination of principal and earnings.
Each year, the total market value would be averaged over the previous five years and the Legislature could pay out up to 5 percent of the five-year average.
Although Wohlforth said myriad possibilities exist why a consensus might not be reached by the conference of Alaskans, one possible consensus could be setting the spending cap at 5 percent with half going to pay dividends to individual Alaskans and half being used for state operating expenses.
"I've given a lot of talks and people agree that we need POMV. They agree that it's a good thing for endowments for Harvard, for Yale but they think you've got something up your sleeve," Wohlforth said.
"No we don't," he said after his formal presentation ended.
"It's an emotional reaction from people. (The Permanent Fund's) been such a good program, always paying a dividend, they don't want anything changed," he said.
"In the '70s and '80s, the fund's investment was all in bonds and the payout was based on the bonds' income," Wohlforth said.
Today, the investments are 35 percent bonds, 55 percent stocks and 10 percent real estate. The value doesn't change until the assets are sold, he said
Under POMV, spending would be based on the combined value of principal and earnings.
The proposal calls for a constitutional spending limit of 5 percent of the fund's value.
As it does currently, the state Legislature would decide whether to pay a dividend to individual Alaskans.
The board of trustees has said the POMV proposal protects the fund for the future by preventing overspending of fund earnings in good years, stabilizing payouts from year to year and protecting the option of an annual payout, whether for dividends or any other purpose, according to Wohlforth.
"I think Murkowski has shown some real initiative in getting this thing started," he said.
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