Jim Crawford: Count all the income of the Alaska Permanent Fund - Must Read Alaska
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Monday, January 17, 2022
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Jim Crawford: Count all the income of the Alaska Permanent Fund

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By JIM CRAWFORD

In Fiscal Year 2020, the net income of the Alaska Permanent Fund was $1.6 billion while the Percentage of Market Value draw was $3.0 billion, a loss of $1.3 billion after the draw.

That was a shock to me. I’ve always trusted that the body of the Fund would not be subject to reduction except from market losses. 

Draws for dividends should be a result of the income of the Fund. The Anchorage Daily News reported on the increased income just projected in the fall forecast of income released by the Commissioner of Revenue. The earnings of the Permanent Fund reported should not include special restrictions on income and expense

The earnings of the Permanent Fund should be reported simply as required by Generally Accepted Accounting Principles, GAAP. According to the Harvard Business Review, 95% of businesses use GAAP to accurately report their earnings. Shouldn’t we have the same system as banks and virtually all publicly regulated businesses? 

Why are we discounting our earnings? For the Alaska Permanent Fund, the Legislature created special discounts to income, such as the POMV, special Statutory Income and almost impossible to follow, deductions for unrealized gains or losses. Unrealized gains are stocks that gained value without sale. Unrealized losses are the opposite. Each of these have the same effect, to reduce our dividend. None of them have been approved by the shareholders, Alaska’s people. 

The POMV draw is the primary culprit of confusion. Harvard uses the POMV as its method for calculating its billions in endowments. The Alaska Permanent Fund is not a university. Its only purpose is to bring the best return on investment possible to its shareholders of the Fund, the people of Alaska. Some Legislators claim we can’t afford to pay a full dividend because it would exceed that allowance under the POMV statute. Some Legislators claim that we don’t have the money to pay the dividend. Neither are true. Change the statute to the universally accepted GAAP.

PFDC statutory income redefines the method of calculating income and expense. It adds deductions for unrealized income as a mandatory deduction prior to calculating the net income. In FY 2021, income calculated at the special rate for Statutory income for the PFC was $8 billion. Calculated under the GAAP rules, income was $19.4 billion. 

The deduction of unrealized income cost Alaskans $11.4 billion. The solution is easy. Realize the earnings by sale so that the values are identical. A strategy of selling and buying back the stock can stabilize the dividend. Understating the actual income of the Alaska Permanent Fund is not good for any one of its shareholders. 

According to the Anchorage Daily News: “Overall, Alaska is expected to collect nearly $6 billion in unrestricted revenue this fiscal year and more than $6.1 billion in 2023. Approximately $3 billion of the state’s yearly spendable income comes from the Permanent Fund Earnings Reserve account, based on the percent of market value, or POMV, formulae lawmakers passed in 2018”. 

According to the fall Revenue Forecast, the income to Alaska for petroleum next year will be $2.9 billion. The POMV draw will be $3.1 billion. Added together, you hit the News $6 billion forecast for next year. But read the fine print. It’s not all the income of the Permanent Fund. The forecast last year was short by $16.4 billion. In the upcoming year, it’s short $3 billion. 

It took me a while to find the $16.4 billion. That money came from last year’s earnings, net of the money set aside for POMV and was relabeled Other Restricted Revenue. The actual earnings are still sitting in the Earnings Reserve Account. 

Counting a discounted POMV draw as full Permanent Fund income reduces the total forecasted earnings. Alaska is projected by APFC staff to collect $5.6 billion from Permanent Fund earnings next year. Oil and gas income and other income are projected by Revenue staff at $3 billion next year. Total forecast $8.6 billion. 

Add that $8.6 billion in state earnings to the federal funds for next year of $5 billion. That’s a total of $13.6 billion. This year, Covid Federal appropriations were an additional $7.6 billion. 

We are awash with cash. 

If you want to see growth of the dividend with monitored spending, require Legislators to use an accounting method that is simple, transparent and in compliance with Generally Accepted Accounting Principles. Then use those real earnings to calculate our 50% for dividends and 50% to provide the Legislature’s ability to cover the bureaucracy. Sustainable, simple, predictable, and accountable. 

Jim Crawford is a third-generation Alaskan entrepreneur who resides in Anchorage with his editor and bride of 38 years, Terri. Capital Alaska LLC is a statewide commercial lender which analyses and may sponsor projects of sustained economic growth for the Alaskan economy. Crawford, known as the Permanent Fund Defender, was a member of the Investment Advisory Committee, appointed by Governor Hammond to plan and execute the Alaska Permanent Fund Corporation. 

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  • Looks to me like Jim wants to break into the state’s piggy bank.
    Typical Republican.

    • Why are appeals for honesty and clarity always counted personal verbal assaults?

    • Can’t be manipulated by PFD politics if you don’t even collect it.

      Man, being a free man is pretty awesome.

    • Looks to me like the caveman needs a few million more years for his brain to evolve.

    • Looks to me that he wants honest accounting, that delivers real numbers, that can be used to follow the law. All the smoke & mirrors that the legislature has implemented must be cast aside in favor of black and white honesty!

    • HOMO,
      Typical Democrat. Loves to state it in reverse. Dems break into the piggy bank and steal the money that belongs to the People. Use it for public projects that award Democrats and their donors, as if the People wouldn’t notice. Bill Walker did it. Look where it got him. You Democrats have your heads up your rear ends. And maybe in many cases that’s where you like it?

    • Remind me again which party has spent trillions upon trillions of public dollars in the last year, with no measurable improvement?
      .
      Democrats don’t break into the state’s piggy bank, they steal from my personal bank. And my kids, and their kids, and on and on.
      .
      Get off your misinformed, bigoted high horse.

    • Oh, please. Plenty of blame to go around, including Democrats. We’ve had Republicans and Democrats alike screw us over on PFDs.

    • Homo, seems to me you are a typical Democrat. You rob people of their money and then dole out this same stolen loot to your Political Allies. You and your co-conspirators known as Establishment Republicans or RINO’s have figured out how to game the system and cheat the little guy out of his due. I don’t have a particular problem with your criminal activity until it comes with your smug Moral Superiority. Know what Homo? I prefer the average thief, you know the kind that steals the spare tire off my pick-up.. Wanna know why? Because that kind of criminal just runs off and leaves me in peace following his crime. No posturing political type is he, just an honest criminal who will take my property and trade it for drugs. You and your ilk on the other hand insult my intelligence and will not leave me in peace after your rapacious crime, as you loudly proclaim that your nefarious actions were for the Common Good.

      • He doesn’t call himself Homo for nothing.

  • Jim , you speak like the money disappeared. It didn’t and doesn’t.
    The Legislature used $3.1 Billion (5%) from the PFER to pay for government and dividends.
    Your worries about accounting apparently only pertain to how the Dividend is determined under a proposed 50/50 constitutional revision (not gonna happen).
    I worry now mostly about what we will do with “too much money” due to the bountiful increase in income from the Permanent Fund and oil prices.

    • Chris, I am no expert by any stretch of the imagination, but all this sounds to me like another sneaky way for the legislature to get their mitts on more of the corpus (officially off limits to them) while squirreling away other funds. Oh and at the same time pretending to be broke. Since you now worry about too much money, how about paying the people what they are due from the last few curtailed PFD checks with interest, dumping the PMOV and getting back to a pre-walker PFD disbursement.

  • Looks like fuzzy math. The bank belongs to the people not the shister politicians. Nice job Jim uncovering the slight of hand by the legislature.

    • They’ve performed several slights of hands in the past few years. >:(

  • FunnyAccounting to cover what they want to embezzle

  • Are you not surprised by the creative math and hand waving by the Juneau legislators that the sky is falling and we don’t have enough money to cover the budget and your permanent fund dividend? So many special sessions for a pittance thrown to the public as a dividend. See? We gave you something, instead of nothing. Move along, nothing to see here. Oh by the way, we are going to have to implement a State income tax and/or a State sales tax to “help” fund the budget “shortfall” and special interests.

    Let the beer pong and leg wrestling continue after hours, since we have to let off some steam and “work” so hard for you in these deplorable conditions. Tongue firmly in cheek.

  • The Permanent Fund is corrupt. The legislature is corrupt. This is not news.

  • Thank you, Jim, for clarifying where all the Permanent Fund revenues have been sequestered from the prying eyes of the permanent residents of Alaska. Revelations of this magnitude further undermine our trust in the shyster SOBs in our legislature who legalized under the Walker administration the theft of the money due us through the PFD. We’re still waiting for a proper accounting, our reimbursement and accountability/retribution for their shameful acts. Shame too on the ignorami who claim our share is actually some sort of undeserved handout.

  • Crawford’s method would yo yo PFD payouts similar to the old swings in revenue from changing oil prices and production. Harvard has built an enormous fund by using the POMV, apparently anything associated with “University” is anathema to right wing conservatives.

    • Frank, you used a comma splice to join two dissimilar thoughts into one sentence.
      .
      I learned that is bad. In a university class.

  • Democrats worship big government. Giving money back to the people is wasteful in their book. There are so, so many progressive causes it should be going to instead.

    • The POMV method limits revenue, by our Constitution Alaska has to have a balanced budget limiting spending. Apparently you are so confused you can’t spell your own name.

      • Frank, the funds creator’s original intent was to limit the size and scope of Government. The earnings of the fund WERE NEVER intended to be used to pay for Government. The Government could have 75% of oil revenue and reserve 25% for the PEOPLE. However, now comes all kinds of accounting gimmicks and legal skullduggery to rob the PEOPLE of their due. BTW Frank, lots of University folks that study economics will tell you that spreading wealth to individuals is the best way to grow an economy. Why is that concept anathema to you? Are you a member of a special interest group that depends upon State funding? Just curious.

  • This suggestion that the Permanent Fund be subject to Generally Accepted Accounting Practices is PERFECTLY legitimate. Actually, its difficult to imagine why it has not been up until now. There is no justifiable reason to not afford it the maximum protection from any potential chicanery that is or may be possible. Moving forward, I would rate this as being an essential protection that every single Alaskan stands to benefit from, and from a common sense standpoint, ought to support. The elimination of the potential for political manipulation that favors only a few is laudable, as well.

  • Thanks Jim for exposing again the Legislature’s smoke and mirrors game. Stealing the PFD and trying to hide it with foggy accounting just makes me angry. POMV was, is, and even after we get rid of it, FRAUD. One caution: if we sell the stock in order to realize the gain, we will drive down prices; then when we buy it back the price will go up giving us a realized loss. Better move: just count the unrealized gain as part of the value of the Fund. The Fund is too large to sell holdings without affecting the market.

  • End the madness. Eliminate the dividend. Use public resources for public purposes. No new taxes!

  • Where is the rest of this year’s PFD? There’s certainly enough to go around. The PFD needs to be enshrined in the Alaska Constitution.. S Big Mike wishes. Also, it should be distributed as a debit card with appropriate restrictions on purchases. All of which should be spent within Alaska, in order to keep it circulating in our economy. Make Alaska Great Again!

    • I too believe in and support your first statement. The PFD should be constitutionally protected.
      I am not in favor of the government issuing a trackable debit card or restricting where money is spent. The PFD is derived from resources extracted from the people’s land, not the governments. The government doesn’t own any land or resources. It all belongs to the people, in Alaska that includes the subsurface rights of so-called “private property.”
      Under the Article 2 of the state constitution, all political power is inherent in… and originates with the people…is founded upon their will only…and is instituted solely for their good as a whole. Article 22 of state constitution says Alaskans are guaranteed the right to privacy, and explicitly says that right shall not be infringed. It is none of the state’s business how I chose to spend my money or if that money is ultimately spent in Alaska. We must defend liberty at all cost.

  • The people on here that say end the dividend, I guess you are are ok with the state taking everything. And when the state continues to spend more, which is the trend, where do you think that more is going to come from? Taxes and more taxes and more taxes.

  • Well, those who are corrupt, will always figure out a way to cheat at the game. It is time to hold them accountable, going back to, sounds like Bill Walker’s days. No surprises there!!

  • What has the state legislature accomplished for the people and the PFD in this last special session? Not a peep lately. Did they do their jobs? No? What repercussions do residents have? We keep voting in those who say they’ll stand up for the traditional PFD, but it’s a bait and switch. What else can we do to be properly represented besides voting?

  • “You will own nothing, and be happy.” So says Klaus Schwab. Well, the first part of that sentence is correct. The legislature is not on our side, the courts or the governor either. We have one, and only one chance to fix this. Vote Yes for the constitutional convention.

    Unfortunately, the same criminal activity has been happening for decades in the social security trust fund. “Loan” 5 trillion to the general fund, then say, “Hey, we owe the money to ourselves.” Now we have to pay more taxes to replace the stolen taxes we already paid. Bernie Madoff would be proud to work for either fund.

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