Connect with:
Wednesday, November 14, 2018
HomePolitics and PolicyP-Fund will lose money this year, thanks to Brexit

P-Fund will lose money this year, thanks to Brexit

Your Permanent Fund dividend by the year.

Your Permanent Fund dividend by the year.

TELLING IT STRAIGHT

Angela Rodell, executive director of the Alaska Permanent Fund, told the editorial board of the Fairbanks NewsMiner last week that Senate Bill 128 might be a tad too optimistic in its premise of how much the Permanent Fund can earn year after year.

Rodell was prescient: She said all that before Brexit happened.

Hawkins

SB 128 is Gov. Bill Walker’s attempt to restructure the Permanent Fund and start spinning off more earnings than it currently does to cover state programs. Not a bad concept, we agree.

However, a consistent draw of 5.25 percent of the market value of the Permanent Fund, as proposed in the governor’s bill,  is aggressive. It would yield about $2.5 billion per year for state spending, which sounds like a lot, but 5.25 percent is what Democrats wanted, led by Rep. Les Gara.

But you never know about the markets, as Brexit has shown. The fund would have to earn more than 7.25 percent year after year to be safe under this scenario.

The current global events in Europe show why the Legislature was wise over the past many months to take a cautious and questioning approach to the proposed changes to the Permanent Fund; while the governor said we need to take volatility out of our revenue picture, the actual degree of Permanent Fund stability is exactly what legislators were questioning.

GOVERNOR IS FURIOUS, FUND IS SLIGHTLY DOWN

Gov. Bill Walker is livid, according to those around him. Livid that anyone would question the math on SB 128.

Walker seems to believe that conservative-minded Rodell has given Fairbanks legislators the cover they need to vote against SB 128.

But it’s not Rodell who gave them cover. It was Great Britain.

The Permanent Fund’s current losses may have come just in time to give Walker a wake-up call. The P-Fund was only up 1.2 percent in the third quarter, trailing its performance benchmark return of 2.3 percent. With Brexit roiling the global markets, there is no way the fund can recover enough by Thursday’s close of business to make up the losses.

The balance stands at $52.8 billion right now, slightly down for the year. But check back on Thursday, when the fiscal year ends and the serious number crunching begins.

Donations Welcome
Written by

Suzanne Downing had careers in business and journalism before serving as the Director of Faith and Community-based Initiatives for Florida Gov. Jeb Bush and returning to Alaska to serve as speechwriter for Gov. Sean Parnell. Born on the Oregon coast, she moved to Alaska in 1969.

No comments

Sorry, the comment form is closed at this time.