Heres how to keep fund permanent

Posted: Sunday, June 10, 2001

The Board of Trustees of the Alaska Permanent Fund Corp. is seeking your support for our proposal to constitutionally inflation-proof the fund by limiting annual payouts to 5 percent of the funds value.

We have studied this idea for years and believe it has merit. Now, we want you, the funds beneficiaries, to take a look at it, examine it carefully and let your elected representatives know how you feel. If the Legislature supports it, you will have the chance to vote on it at the November 2002 General Election

Introduced in the House as HJR 15 and in the Senate as SJR 13, our proposal protects the funds real value and ensures that the fund and its income which is used to pay dividends will grow over time. It also makes available $175 million to $300 million per year for purposes other than inflation-proofing and dividends.

The proposed amendment provides two constitutional limits on permanent fund spending: (1) principal would continue to be unavailable for appropriation; and (2) appropriations of fund income would be limited to no more than 5 percent of the funds average market value for the past five years.

How much could be appropriated under this limit? In 2003, when the proposal would go into effect, the funds five-year average market value is projected at $28 billion. That would limit the payout that year to no more than $1.4 billion. Dividends are projected at $1.1 billion.

The 5 percent limit is chosen because it is the maximum sustainable payout rate that maintains the funds real value, but also maximizes that amount of income the fund can produce in the future. In addition, 5 percent is about 1 percent higher than what is currently being paid out for the permanent fund dividend. As a result, the existing dividend program is untouched.

This proposal does not make any decision as to if or how fund income other than income for the dividend will be used. That decision remains to be made by you and your elected representatives each year in the future. This proposal simply sets a limit on the annual spending of fund income to ensure that the entire fund will be constitutionally protected against inflation and that the production and distribution of fund income over time will be maximized.

Our proposed constitutional amendment is short and easy to understand. You can read it in its entirety on our web site at www.apfc.org. By supporting this amendment, you are helping the trustees make sure the permanent fund stays permanent.

Clark S. Gruening is the chair of the board of trustees of the Alaska Permanent Fund Corp. He served in the state House of Representatives from 1974-1978 and played a major role in shaping the objectives and management structure of the Alaska Permanent Fund.



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