Trustees urge Legislature to alter fund structure

Posted: Sunday, November 17, 2002

KENAI (AP) -- The board of the Alaska Permanent Fund Corp. repeated its support for a new way of organizing the state's huge savings pool at a two-day meeting here.

Governor-elect Frank Murkowski has endorsed the idea of restructuring the fund as an endowment, a change that would require amending the state constitution.

But with several trustees likely to be replaced when Murkowski takes over, the board decided not to recommend any new legislation. Instead, the trustees decided to send a transcript of the meeting to Juneau.

The concept, which the board has been promoting for several years, would structure the fund as an endowment, with a set percentage of the total set aside each year for dividends and state spending. The trustees have suggested 5 percent is a good figure.

The state House of Representatives approved the idea last year, but the Senate didn't act.

Board members expressed frustration at the Legislature's past failure to endorse the plan.

''(The Legislature's) neglect to do that last year ... certainly will cause the dividend to be lower this year,'' said board member Jim Sampson. ''I was surprised the Legislature did not allow the people to vote on a constitutional amendment.''

Currently, the fund is structured so that a set number of dollars is designated as untouchable principal. That figure is adjusted higher each year as new money comes in and inflation adjustments are added. But the value of the fund dipped below the principal number earlier this year.

If that's the case next June 30, when the dividend is calculated, no dividend will be paid.

The principal number will be $22.1 billion on June 30, and only half of the money beyond that amount can go toward dividends. So for the full dividend of about $1,200 to be paid, the fund balance will have to be $23.6 billion next June. It was $22.8 billion as of Thursday's market close, but the figure can fluctuate by $200 million or so on any given day.

''The notion of principal in a modern endowment is an anachronism,'' said trustee Wilson Condon, who is also the revenue commissioner.

But the board decided not to recommend any legislation because a new board will soon be in charge of the fund's management.

They decided a plan would garner more support if new members and the new administration were in charge of pursuing the idea.

''We think it's an important issue,'' board chairman Eric Wohlforth said Thursday. ''But we did not want to be pushy about it at this point.''

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