Jim Crawford: The people and the Permanent Fund

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By JIM CRAWFORD

Who is forgotten in the management of Alaska’s Permanent Fund?  The People of Alaska. 

Let’s look at the current crisis of the fund, as reported by Chairman Ethan Schutt. He wants all Alaskans to read the Alaska Permanent Fund Corporation’s annual report. I agree. We need to review its earnings and expenses.  

In 2022, earnings were 1.45%. The simple reason why the dividend has been supported is that earnings were shared fairly, and expenses were capped. But now our earnings are low, and our expenses are quadruple the S&P Index. 

Count me among those who think the Permanent Fund dividend is woefully short of what earnings could be by the Fund. 

The dividend, as envisioned by the architect of the fund, Revenue Commissioner at the time, Sterling Gallagher, was created to build a bond to the people, a reason for the recipients to fight for the fund.  

Now, government big spenders in and out of Alaska tell us not to worry about low earnings or lower distributions from the Permanent Fund. Outsiders have different priorities than the people of Alaska.  It’s time to return to the advice of the PFD defenders on how we’re doing. I did, and came up with broad dissatisfaction with the rate of return.  

I like to read the State of Alaska’s financial statements for fun. I read the financials of the Permanent Fund for the retirement of my family.  

The age of Alaskans is extending. So the earnings of the Permanent Fund Corporation should be part of the retirement planning for all Alaskans. Ever since Gov. Bill Walker in 2016 declared a divorce between the earnings of the fund and disowned the dividend formulae, it’s been a crapshoot to determine the dividend. What is the latest excuse to spend the earnings of the fund on government instead of the dividend? 

It’s critical for the people to understand this plan to spend the earnings on more government. Examine the Percent of Market Value: The Legislature set up the Percentage of Market Value approach to fence off 95% of the Fund’s earnings and spend the principal.  The POMV draw is based on a percentage of the average market value of the Fund for the first five of the preceding six fiscal years. The draw is subject to appropriation and is set in statute at 5.25% for fiscal years 2019-2021 and 5% from fiscal year 2022 forward. This is unnecessarily complex and hard to follow.    

Its effect is to force competition between the people’s dividends and all the lobbyists, nonprofits and big government spenders.  Keep in mind that those same Legislators are protecting unconstitutional dedicated funds held by state agencies of $6.7 billion and more.  Legislators want to make sure that the 5% includes the dividend faceoff with government spending setting up the battle.  

The POMV is set up as direct competition with your dividend. And that is slow death for the dividend. Some Legislators don’t want you to have any dividend at all.

Let me show you a different approach that puts more money in your pocket that could be implemented next Session.  

Let’s ignore the current debate over the amount of the dividend. Let’s change the approach and instead of a dividend, pay out an “energy rebate.”  An energy rebate is not taxable according to actions of the IRS last year when an energy rebate was paid and was not taxed.  

Currently, the percentage of tax going to the IRS is around 24%. If you switch to a non-taxable approach, you gross up the pay out by 24%. That means you can pay out 24% more that you have been paying out under a taxable dividend. Due to the IRS guidance on the 2022 dividend, the dividend ($3,284) was broken up in a taxable amount, ($2,622) and ($662) which was nontaxable.   

If you agree that your kids’ dividend has been shorted, read the financial statements to find the hidden money. Remember that Jay Hammond’s approach to your dividend was 50% for Alaska government and 50% for the people’s dividend. Then call your Legislator.  

Tracking the earnings and expenses of the Alaska Permanent Fund Corporation is not that difficult. Start with an index like the Standard and Poor 500 to compare income and expense. The S&P 500 compares the top 500 public companies in the United States. Since we invest internationally, the numbers are conservative for the PFC comparison. The index shows you what the rest of the market is doing.

Top companies to compare are segregated in the Index by sector.  The sectors we’ll use are Technology, Communications services and Energy.  Returns are judged by stock price, dividend and expense. 

Stock price: Technology         +32%  Dividend:        1.53% Expense .1%

Stock price: Communications +36%  Dividend:          .83% Expense .1%

Stock price: Energy                +34%  Dividend:        1.53% Expense .1%

The entire index, all the sectors combined, earned a yield of 17% in one year and had an expense of .09%. Safe alternatives to existing investments such as covered calls or investments with returns on the index are available to reduce costs.  

In FY 2022, our earnings through the Alaska Permanent Fund were $420.7 million. Our dividends were $82 million. Expenses are way out of line with earnings. The solution for investors like us is to cut expenses to the market average or increase earnings.      

The Board should change the dividend formulae. Get it back to a percent of earnings, not the POMV.  And let’s remember that it’s our fund and should be run so that the people of Alaska receive the maximum benefit. 

Jim Crawford is a third-generation Alaskan entrepreneur who resides in Anchorage with his bride over 40 years, Terri.  His current venture is Capital Alaska LLC, a statewide commercial lender which analyzes and may sponsor projects of sustained economic growth for the Alaska economy. Crawford, known as the Permanent Fund Defender, was a member of the Investment Advisory Committee, appointed by Gov. Jay Hammond to plan and execute the Alaska Permanent Fund Corporation.  

21 COMMENTS

  1. I think most of us were taxed for the full amount of $3284 so how do we get a credit of the $662 non taxable amount on our taxes

    • File an amended return and hope that the amount in refund exceeds the cost of filing an amended return.

      That is if you use a professional to file the amended return.

  2. Sorry Jim, you make entirely too much sense so it will never be heard by the clowns that make the decisions.

  3. Disagree. We the people aren’t forgotten. We’re deliberately ignored.

    The legislature and their PF management toadies don’t care. We’ve been told to our faces we can’t spend it in ways they approve of, so we’re not going to have it.

    • Frank, foolishness might also include thinking that the Political Class knows better than you on how to spend YOUR $.

    • Mr. Crawford wasn’t saying to rely on Gov. for your retirement. Rather he was saying that the PFD is a portion of your retirement picture.

  4. PFD checks suffer as non-profit organizations are causing more state spending, though rising costs of labor and expansion of government based on population increase’s also cost more.
    It’s the illusion non-profits are not costing the state money which is false as there is no such thing as a non-profit organization because the profits are hidden into salaries.

  5. I don’t have the information, but I thought I heard that there was talk of having our money managed by out-of-state or out-of-country firms? Isn’t our money already being managed by a management firm that is out of Washington (State of Washington)?

  6. I wonder what Jim Crawford thinks about the Permanent Fund dancing around and hiding:
    Alaska Permanent Fund leaders consider seeking exemption from open-government law
    Why do I feel like we are be run down the rabbit hole and losing any control of our money??
    What’s the value to us shareholders in making these proposed changes??

  7. I think it should be a deep closely held secret. Don’t you? Forbidden subject for only new and foreign management to know.

  8. God Bless you Brother Jim. You stated, “the dividend, as envisioned by the architect of the fund, Revenue Commissioner at the time, Sterling Gallagher, was created to build a ‘bond to the people,’ a reason for the recipients to fight for the fund.” Five Governors in Fairbanks attested to a similar understanding of the PF and dividend. This are recorded historical facts. However, our feckless executive, legislative and judiciary are simply failing to honor their oaths to uphold our laws related to the PFD.

    Moreover, state statute AS 39.05.050 The principal executive officer of each department and subordinate officials shall furnish corporate surety bonds in the instance and amount required by law or determined by the governor upon recommendation of the commissioner of administration. The state shall pay the cost of the bond. The attorney general shall approve the form of the bond. & 15.010 -100 requires all state of Alaska public officials to post bonds to protect all Alaskans from the official’s potential misconduct, malfeasance & nonfeasance in office.
    The intent of this law is clear, if such bonds were posted as required, they would be available to compensate every Alaskan for PFDs they have not properly received.
    AS 39.15.030 An official bond executed by a state officer or employee is in force and obligatory upon the principal and sureties to and for the state, and for the use and benefit of all persons injured or aggrieved by the wrongful act or default of the officer or employee in the official capacity or employment of the official or employee. A person injured or aggrieved may bring suit on the bond in the person’s name.

    However, Alaskans need to realize their government is failing to require state officials to post said Public Official Bonds. Alaskans are not being financially secured by these bonds as required by law. It’s high time for a Grand Jury investigation into this gross failure to follow the law that protects all Alaskans.
    I am calling upon all good Alaskans to join with me in forming a committee during November 2023 to draft a “Petition of Grievance” addressed to a Grand Jury to investigate the improprieties described above. The petition should include, among other issues, the proper appointment of Judges, re-establishing secure voting (not mail-in), reforming OCS and child trafficking, and reform of the grand jury process itself. Concerned Alaskans should call me immediately to be included in this reform process.

    Ed Martin Jr, cel- 907-252-7857, Kenai,

    Second Generation Alaskan Before Statehood

    Great Grand Father to Fifth Generation Alaskans

  9. No! Absolutely not! All of us need to work together, to find out ways to make the best choices. Letting a handful of very few people could be a terrible mistake. In my opinion, the best way to handle this, would be to have a gathering of the minds and begin to talk about ideas and options, and anyone could have their say. Let the Ideas begin! We the People can do this!!! Let Kindness Prevail! We are neighbors who care for each other. Let’s show it.

  10. AS 39.05.050 The principal executive officer of each department and subordinate officials shall furnish corporate surety bonds in the instance and amount required by law or determined by the governor upon recommendation of the commissioner of administration. The state shall pay the cost of the bond. The attorney general shall approve the form of the bond.
    The purpose of the public official bond guarantees that an elected government official in certain positions will comply with the government rules and regulations.
    The bond amount is required or determined by Governor and Attorney General approves the form of the bond. Is the Lt. Governor then responsible to keep track of all the bond information? Can the Executive Branch, Governor Dunleavy provide this information to Alaskans?

  11. AS 44.85.050
    Before the issuance of bonds…Each surety bond shall be conditioned upon the faithful performance of duties of the office of the director or treasurer, to be executed by a surety company…and filed in the office of the lieutenant governor…Each director shall maintain the surety bond in force…….
    Are all legislators required to have bonds?
    Has a public records request to the Lt. Governor’s office been submitted by an Alaskan citizen?

  12. If the expenses of the Permanent Fund investments are so out of line, why not just invest in a S&P500 mutual fund and a portion invested in bonds. That would shrink staff required to only a couple of folks to answer the phone.

    • If I had my life to do over I would just invest in a dow index fund and be much farther ahead than I am now. Investing in individual stocks is a crap shoot at best.

  13. We must keep the PF out of reach of politicians!! It seems I have seen too many Democrats in government agencies lately which is a scary thought seeing as how most big cities run by Democrats have gone broke!! We must keep close track of the Permanent Fund and make sure that it gets back to what the official intent was when J Hammond created it!! If politicians get ahold of it they will just pi** it down their legs!!

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