Financial returns have been less than needed to keep the fund’s spendable account full, potentially endangering the state budget.
The Alaska Permanent Fund isn’t running out of money, but it may be running out of money that can be spent. to beat inflation and the demands of the state treasury, the Permanent Fund’s spendable reserves may be exhausted within four years.
The trustees have directed corporation staff and outside experts to begin analyzing the situation and intend to finish a paper, likely with formal recommendations to the Legislature, later this year. repeatedly The principal is invested, and the earnings from those investments automatically flow into the earnings reserve.
Twenty years later, the fund’s then-chair, Jim Sampson, declared that “inflation-proofing has been — and will continue to be — a key component of the fund’s success.” A pre-COVID boom in the fund’s investments increased the earnings reserve, but in four of the past five years, the fund has earned less than withdrawals and inflation combined.This spring, in order to ensure the amount of money available for spending in the earnings reserve, the Legislature capped the amount of this year’s inflation-proofing transfer.
Money that’s spent can’t be transferred to the principal and saved to be reinvested for future returns.“We’ve got to keep track of inflation, or you slowly erode your Permanent Fund. So you can skip or lighten up a year if you want. But you’ve got to keep up in the long run,” said Sen. Bert Stedman, R-Sitka and co-chair of the Senate Finance Committee.
“It’s the most difficult to achieve, but it’s the most durable solution,” said Deven Mitchell, who leads the Alaska Permanent Fund Corp on a day-to-day basis as its executive director. Getting legislative supermajorities “to agree on which day of the week it is might be tough at times,” Schutt said. was introduced this spring by Rep. Cliff Groh, D-Anchorage — doesn’t say how much should be spent on the Permanent Fund dividend, it’s almost impossible to divide the two issues.
Shrinking that figure would make it easier for the Permanent Fund’s investments to keep pace with spending and inflation. In the past few years, lawmakers have saved some money but have spent more — on special one-time dividends and one-off projects.
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