Permanent fund's silver anniversary cause for celebration

Posted: Sunday, March 10, 2002

Believe it or not, it has been 25 years since the first deposit of dedicated oil revenues was made to the Alaska Permanent Fund.

In the years since that first $734,000 was deposited into the fund on Feb. 28, 1977, the fund has grown beyond Alaskans' wildest expectations. Today its value stands at more than $26 billion. It ranks among the 100 largest investment funds in the world.

The permanent fund began paying dividends to all Alaskans 20 years ago. Since 1982, almost $11 billion has been distributed in the form of dividends to state residents. The highest check was $1,963.86 in 2000 -- almost six times more than the lowest dividend check of $331.29 paid in 1984.

What a difference 25 years makes. That first deposit to the permanent fund would hardly put a dent in the billion-dollar budget gap the state faces today.

The fund and the dividends it pays have become Alaska's sacred cows. Debating the best use of the fund and how big Alaskans' dividends should be have become part of the state's culture.

Few would argue, however, that the creation of the permanent fund and the dividend program took vision and courage. The first 25 years of the fund have been a great success, but what does the future hold?

"... (I)f we continue inflation-proofing the fund to maintain its real value, and if we maintain the discipline to stay with sound investment policies, the fund could well be producing $5 billion of income per year by the time our children are getting together to celebrate the fund's 50th anniversary," writes Jim Sampson, the chair of the fund's board of trustees.

As part of the 25th anniversary celebration of the first deposit to the fund, students from around Alaska participated in an essay contest based on the theme "The Alaska Permanent Fund: Past, Present and Future." Three students from Kenai Central High School were awarded $100 savings bonds for their efforts.

As Alaskans ponder the success of the fund's first 25 years, these students provide thoughtful insights about the fund's future.

From Scott Kornfield, a KCHS senior, who titled his essay "Permanent means forever, right?": "... (T)he permanent fund has provided Alaska with the security that will ensure a long-term benefit from a short-term income boom. Oil in itself is not a renewable resource; however, the income generated from it is. It has been placed into a fund that is carefully controlled by the voters of Alaska. This generation helps to ensure money is available for our further generations, and as a result, we are given a slice of the pie, which is miniscule compared to the funds that are being ensured for future generations. If every generation follows in stride, then theoretically the fund will never be depleted, and there is comfort in that security."

From Jesse Tapley, also a KCHS senior: "I think that the state should propose to use a small percentage of the principle of the fund to use toward schools that need more education funds. There are so many schools in Alaska that do not have adequate funding. There is such a huge number of dollars in the Alaska Permanent Fund that it would be worth using $100 million or so for some of the basic necessities like textbooks that some schools cannot afford. ...

"This fund has a great and prosperous future. Even if the oil fields are depleted and the fund no longer gets oil revenues, it will still increase massively each year because of the investment income. The state should take small amounts of money out of the principle, or just the leftover income, and use it for education, development, or any other areas that need money and don't have the resources to get it. ... This money could help Alaska become a better place."

From Amanda Trux, another KCHS senior: "After many years of debate about whether the fund should be managed as a public trust or as an economic development bank, a decision was made. In 1980, the fund was established as a public trust. The best thing about it is that the fund is functioning as planned. It has become large and provides benefits for Alaskans. The fund will continue to be profitable and benefit Alaskans if we continue to manage the wealth of Alaska responsibly. ...

"The fact that Alaska, as a state, is interested in providing financial stability for future generations makes me feel better calling Alaska my home. I hope Alaska will continue down the path of success. Alaska's future counts on it."

The message for today's decision-makers: When mapping the future, it's wise not only to look at yesterday but to seek the vision of tomorrow's leaders. After all, they will be the most affected by what is -- or isn't -- done today.

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