The executive director of the Alaska Permanent Fund noted a few days ago that those who manage the fund were smiling quite a bit with the expiration of the 2003 fiscal year at the end of June. The day's passing meant that gains made during the stock market's recent run up were locked into the dividend calculation and that, yes, there would be a dividend paid this year.
Earlier in the fiscal year the fund's ability to pay a dividend stood in serious doubt. Years of poor performance on Wall Street meant that, under the present formula, the fund might not have had the money available. That's because the size of the annual payout is based on a five-year average of fund earnings, and a dismal performance in fiscal 2003 could have tipped the average toward zero.
As it is, the tame market rally was enough to prompt estimates that this year's dividend might be about $1,100. That's down sharply from last year's $1,541 and 2000's $1963.86 and roughly matches the total paid in 1996.
Alaskans were lucky this time.
Yet such a payout roller coaster can be avoided easily in the future if the governor, legislators and Alaskans demonstrate the wisdom to approve a plan long-promoted by the board of trustees of the Alaska Permanent Fund Corp.
A bill sits in the Legislature to redefine, as the trustees suggest, how the permanent fund makes money available to state government. Presently, earnings from the $22 billion fund are deposited in the state's general fund, from which dividends are paid in accordance with that five-year formula and from which deposits to the fund's principal are made to offset inflation. The Legislature has been returning the remainder of the earnings, too, because it is politically fearful of using the money for government purposes even though it has the authority to spend it however it desires.
The board of trustees, after several years of study, has proposed a constitutional amendment that would reroute all earnings of the permanent fund back into the fund's principal and allow state government to withdraw up to 5 percent of the fund's total market value, averaged over a period of five years. Separate legislation, and not in a constitutional amendment, would specify what portion of that 5 percent would be allocated to dividends and what portion would be available to help fund government operations.
The idea, which the trustees want to see on the November 2004 ballot, is sound for several reasons: It will provide a fairly stable dividend payout, give government the steady and predictable source of income that it sorely needs, and, in the words of the trustees, assure Alaskans that the real value of the fund ''will be preserved for all time.'' And voter approval would be taken by legislators as public permission to use fund money for government expense, voiding all those ill-advised campaign slogans that promised ''No use of the permanent fund without a vote of the people.''
Several legislators have embarked on a series of hearings around the state to inform the public and take comments on this idea, known as the ''percent of market value'' idea, or POMV for short.
Alaska's fiscal sanity depends on this idea and on Alaskans' willingness to understand it and approve it.
Fairbanks Daily News-Miner
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