I support House Joint Reso-lution 26, the proposed constitutional amendment to inflation-proof the permanent fund and provide a spending limit that will come before the voters in November 2004 if it passes by a two-thirds vote of each house of the Alaska Legislature.
The 5 percent of market value (POMV) payout limit will constitutionally inflation-proof the entire permanent fund. Right now, only the principal is inflation-proofed, and that is done by statute, not through the constitution. The 5 POMV will set a spending limit that forces us to resist the temptation to appropriate too much money when the fund is flush, yet makes distributions available in lean years.
Under the current distribution, the Legislature may appropriate the entire earnings reserve account. An annual payout based on market value is compatible with the fund's diversified portfolio that is managed for long-term value over short-term gain. The current distribution, based on income, was appropriate 20 years ago when the fund was invested primarily in bonds.
How the Legislature chooses to divide the payout is an important question. The 5 POMV is a management tool, not a distribution plan.
However, the two are intrinsically linked. The use of the payout should not be set in the constitution because this is an appropriation issue better left to the legislative process.
However, the Alaska statutes relating to permanent fund income and income distribution must be amended to conform to the 5 POMV because they don't apply as written. Our legislators must establish a comparable dividend formula when they change these statutes.
Fifty percent of the money available for distribution after inflation-proofing cannot provide the same amount for dividends as 50 percent of the money available for distribution before inflation-proofing. Fifty percent of eight translates to 80 percent of five. Eighty percent of the payout must be appropriated for the dividend program. The 5 POMV is too valuable an asset to risk voter rejection by threatening their dividend checks.
It is time to move forward on a fiscal plan. This constitutional amendment combined with a change to the statutes securing 80 percent of the annual payout for dividends is critical step.
It is a three-way win. The permanent fund gets a better management framework, the Legislature gets a predictable revenue stream, and the people keep their dividend formula.
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