EDITOR, Daily News:
The state budget is currently being negotiated in Conference Committee, with its final passage through both the House and Senate hopefully occurring by the end of next week. When the Alaska Legislature convenes again, its focus will turn to a more daunting task: redefining the role of the Alaska Permanent Fund in how it pays for our annual dividend and state services. Multiple House committees, including House Finance of which I am the vice chair, have hosted informational hearings on different ideas for the future of our Permanent Fund.
Last week, the permanent fund reached $80 billion for the first time. The fund is our largest and most valuable asset by far, and, last year, paid for over 70% of our state-funded services, as well as our annual dividend. The goal of many in the Legislature, including Sen. Stedman and myself, is to continue growing and protecting the fund; to have it reach $100 billion in the not-too-distant future would be a milestone that would bring many benefits to every resident in the state.
In order for the fund to continue to grow in real value, we need to be cautious about how much we draw from the fund. This past year during the COVID-19 pandemic, the market fluctuated greatly, affecting the value of the fund. Although it is valued at nearly $81 billion today, it was $20 billion less in March 2020. In order to offset that volatility, I support a cautious percent of market draw (POMV) of 5%, which is the level we currently have in statute.
One idea is House Joint Resolution 1. HJR1 would put a constitutional amendment before the voters to combine the principal and the Earnings Reserve of the permanent fund. By combining the principal and the Earnings Reserve, effectively the entire fund is the principal and protected from excessive legislative appropriation. HJR1 constitutionally limits appropriations from the fund to 5% of the average of its market value. By continuing the POMV model and making the fund fully principal, HJR1 would provide stability to the Alaska Permanent Fund Corporation, allowing them to better manage their assets and earn the best possible return to the benefit of Alaskans.
Other proposals also have come forward, including the governor’s resolution — also a constitutional amendment — which would constitutionally guarantee a dividend, cap the draw to 5%, and split the draw 50-50 for dividends and state services. However, this plan leaves a budget deficit of over a billion dollars, that would result in either an additional 22% cut in state services or the implementation of significant new broad-based tax(es).
As we continue to make decisions about the permanent fund and the future of Alaska, feel free to contact my office any time with concerns or preferences. I need to know from you how best to proceed. You can email me at Rep.Dan.Ortiz@AKLeg.gov or call my office.
REP. DAN ORTIZ
House District 36