Alaska Permanent Fund Proposal Sparks Controversy

In a recent column, the debate over proposed amendments to the Alaska Constitution concerning the Permanent Fund has intensified. The suggested changes aim to shift from a two-account system, consisting of a principal and an income account, to a single-account structure. Currently, the principal is constitutionally safeguarded from usage outside of designated investments, while only the income portion can be utilized for distributions and general spending.

Proponents of the amendment argue that the current structure risks insufficient funds in the earnings reserve to meet the required percent-of-market-value (POMV) draws. However, the Legislative Finance Division claims there is only a 50% chance of this occurring, and the likelihood drops below 20% when considering cash only for POMV draws.

Historical data reveals cash income from the Permanent Fund has consistently surpassed cash obligations. While concerns about a potential shortage in the earnings reserve account persist, the facts demonstrate this fear is exaggerated. By excluding unrealized gains—considered income under GAAP—the impending risk appears to diminish. Projections show that even with additional requirements for inflation proofing, the cash balance is expected to remain positive, ending FY34 with approximately $28.5 billion in the earnings reserve account.

The Sustainable Budgets initiative, led by Managing Director Brad Keithley, aligns with this perspective, advocating against the merger of the two accounts. With over $53.5 billion projected in cash income against expenditures, concerns regarding the depletion of the earnings reserve are unwarranted.

For continued updates on this discussion, visit the Sustainable Budgets website or follow them on social media.

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