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Legislature should put percent of market value proposal on 2004 ballot What others say

Posted: Monday, November 17, 2003

Alaskans may get a dramatic demonstration next year on how the permanent fund can be better managed and put more money in their pockets.

And in our book far more importantly the fund could at last be put to the use for which it was originally intended, paying a portion of the cost of state government.

Under the existing system, the Permanent Fund Corp. projects that $564 million will be available for dividend checks next year, 18 percent less than this year's $648 million. Just a few weeks ago, each of the 598,813 eligible Alaskans received payments of $1,107.56.

But next year's $564 million would provide money for dividend checks of only about $943, about $165 less than this year's payments. That would be the first time dividends have been less than $1,000 since 1995.

If the proposed ''percent of market value'' approach were used and 5 percent of the total value of the fund were counted as earnings and the 5 percent divided between dividends and paying for state government the checks would be roughly $1,082 and another $648 million would go into state coffers to pay for government.

In short, using the so-called POMV would mean larger dividend checks and taking a huge bite out of the state's fiscal gap. The fund itself would remain healthy and able to grow. As it grows, so would the dividends and the amount available for state expenses.

The reason for the smaller checks under the existing system is that the formula involves using a five-year average for calculating earnings, five years during which the international investment markets were largely in the tank.

The dividend money comes from the fund's Earnings Reserve Account, which is funded by sale of profitable investments. Unfortunately that tends to encourage the permanent fund managers to sell profitable investments and hang onto the bad ones, since selling the dogs does nothing for the Earnings Reserve Account.

The window for a painless move to the POMV approach is relatively narrow. It would not have been painless a few years ago and it probably won't be a few years from now. And the change could not be made quickly enough to affect next year's checks, since it would require legislative action and a vote in next fall's election.

But it's time for the Legislature to do its part and pass legislation that would put the POMV question on next year's ballot.

The Voice of the (Anchorage) Times - Nov. 3



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