July 1 marked the start of Fiscal Year 2025 at the Alaska Permanent Fund Corporation.
As it does each year since a 2018 law went into effect, the Permanent Fund has committed some funds to the Percent of Market Value (POMV) draw for the State’s operating budget for the following fiscal year, which is FY 2026. The FY 2025 POMV draw of $3.7 billion supports the current fiscal year’s budget.
The Earnings Reserve Account has realized earnings of $3.9 billion that are available for the FY26 POMV draw.
An annual 5% draw from the Alaska Permanent Fund’s Earnings Reserve Account provides more than 50% of total Unrestricted General Fund revenue, which funds State government operations and the Permanent Fund dividend to qualifying Alaskans. $1.4 billion is set aside for inflation proofing.
Unaudited FY 2024 financial statements that dial in the specifics will be available online at the end of July at apfc.org/report-archive.
Last July’s report showed an overall balance of $78 billion in the fund, with $67.5 billion to total principal. This year, the fund will likely show an all-fund balance of more than $80 billion, about double what it was in 2012. The fund has been riding at about $80 billion for several months.
$80 billion isn’t what it used to be. Although the fund has doubled since 2012, inflation has eaten away at the value. Between 2012 and 2022, the U.S. dollar had an average inflation rate of 2.46% per year, for producing a cumulative price increase of 27.47%. A $20 in 2012 would buy what it took $25.40 to buy in 2022. From July 2022 to July 2023, the Consumer Price Index for all urban consumers increased 3.2%. Therefore, the $2 billion gain in the fund, year over year, is barely keeping up with inflation.
The Permanent Fund has enough to potentially meet the 5% earnings draw for Fiscal Year 2026, but just barely. It will need solid returns in this fiscal year in order to meet demands of the State’s operating budget and annual dividend — and that doesn’t factor in what it will need in 2027.
The Alaska Permanent Fund is a unique fund established to help the state operate once oil was gone and the revenue stopped coming in from the North Slope. The fund was established by Alaska voters in a 1976 vote that added the following language to the Alaska Constitution in Article IX, Section 15:
“At least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.”
The constitutional amendment protects the fund deposits by dividing the fund into two parts: the principal (non-spendable) and the Earnings Reserve Account (spendable). The funds are commingled and invested under the same asset allocation. Like other investment funds, the Alaska Permanent Fund is subject to market fluctuations.
