A proposal the Alaska Permanent Fund Corp. favors to inflation-proof the fund is not the only one on the table.
The corporation's favorite is Senate Joint Resolution 13, introduced by the Legislative Budget and Audit Committee. SJR 13 proposes amending the Alaska Constitution to require all permanent fund earnings to be deposited to the fund, and to limit annual spending from the fund to 5 percent of its average market value for the previous five years.
Senate Joint Resolution 11, introduced by Sen. Jerry Ward, R-Anchorage, and Sen. Lyda Green, R-Matanuska-Susitna, proposes amending the Alaska Constitution "to guarantee the permanent fund dividend, to provide for inflation-proofing, and to require a vote of the people before changing the statutory formula for distribution that existed on January 1, 2001."
A Senate Judiciary Committee substitute adds detail to Ward's proposal. It proposes amending the Alaska Constitution to require that:
n Each year, 21 percent of the permanent fund's income for the previous five years would be available for distribution. However, the amount for distribution could not exceed the fund's income from the previous year plus the balance in the earnings reserve account.
n Each year, half the money available for distribution would be designated to pay dividends to Alaska residents.
n From the remainder, enough money would be transferred to the principal to protect it from inflation.
n Any money left (from the amount for distribution) after paying the dividends and protecting the principal from inflation could be spent for public purposes.
Robert Storer, executive director of the Alaska Permanent Fund Corp., said the two proposals are not incompatible. The 21 percent in Ward's proposal is similar to the rolling five-year average in SJR 13, he said.
The corporation expects the fund to earn an average of 8.25 percent per year. Under Ward's proposal, half would go to the dividend program. Then, the corporation would deposit enough to cover inflation, which the corporation expects to be 3.25 percent per year. That would leave seven-eights of a percent that could be spent for state government -- about the same as the corporation expects under the amendment proposed in SJR 13.
But there is a difference.
"Ours puts inflation-proofing ahead of the dividend," Storer said.
Like present statutes, Ward's proposal puts the dividend program before inflation-proofing, he said.
"The advantage is, that ensures the long-term purchasing power of the fund," he said.
Another difference is that SJR 13 would inflation-proof the earnings account as well as the principal. Current statutes and Ward's proposal would inflation-proof only the principal.
House Bill 35, introduced by Rep. Bill Hudson, R-Juneau, would change state law rather than the Alaska Constitution to:
n Make 5.3 percent of the fund's average year-end market value for the previous three years available for distribution. However, the amount available for distribution could not exceed the balance in the earnings reserve fund.
n Each year, three-quarters of the amount available for distribution, or the balance in the earnings reserve fund, whichever is less, would be designated to pay dividends to Alaska residents.
n A quarter of the amount available for distribution, or the balance in the earnings reserve fund, whichever is less, would go the the state general fund.
Melanie Lesh, Hudson's finance aide, said Hudson now agrees with the SJR 13 proposal to limit spending from the fund to 5 percent of the fund's rolling five-year average market value, a formula standard among large endowments nationwide.
Hudson has prepared a draft committee substitute bill, she said, but he hasn't yet asked that it be heard in committee because he thinks it should be part of a larger plan to close the state budget gap. He wants to give the public time to discuss the options for a broader plan, she said.
"He is not averse to a constitutional amendment," Lesh said. "He personally is committed to seeing either the permanent fund trustee's bill or his bill pass (by the end of next session)."
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