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Officials say Permanent Fund dividends to drop

Posted: Thursday, February 14, 2002

JUNEAU (AP) -- Annual Permanent Fund dividend checks paid to Alaskans are expected to drop over the next several years after enjoying a near-record payout last year, fund officials said.

A weak stock market cost the $25 billion fund about $6 million in 2001 and if the trend continues, dividend checks could dip as low as $850 in several years, officials told a House Finance Committee this week.

Payouts to eligible Alaskans this year could range from $1,610 to $1,670, said Chris Phillips, finance director of the fund.

By 2005 Permanent Fund Dividend checks could be $1,550 to as low as $850, Phillips said. Permanent Fund dividend checks haven't dipped below $1,000 since 1995, records show.

House Finance Committee Co-Chairman Eldon Mulder said the outlook was sobering.

''There aren't going to be huge infusions of cash into our state treasury,'' said Mulder, a Republican from Anchorage. Mulder backs two bills that would use Permanent Fund earnings to pay for state and local government.

But he said Alaskans dividends are at risk in the near future, not from the Legislature but from a bear market.

The $21.2 billion principal is off limits to lawmakers unless Alaskans vote to let them spend it. But any income made by investing the principal may be spent by lawmakers, who currently tap earnings to fund the dividend and to adjust the principal for inflation.

Any extra income goes into the earnings reserve, which dropped from $6 billion in 2000 to $3.6 billion in 2001, partly because the state had to tap the reserve to fund the 2001 dividend.

Projections by the corporation show a 25 percent chance the reserve could drop to $900 million by 2004.



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