By MICHAEL TAVOLIERO
Alaskans, beware. Be very aware.
The Legislature is maneuvering to dismantle the very protections that have kept our Permanent Fund strong for generations. Their plan? Merge the constitutionally protected principal with the more flexible Earnings Reserve Account (ERA) under the guise of “simplification.”
Robb Myers: Why we should not combine Alaska Permanent Fund accounts
Do not be fooled. This is not simplification. It is surrender to the public unions and other “special interests”, including health care and social service providers, education bureaucracy and school district administrations, municipal governments and associations, nonprofit and advocacy groups, members of our own legislature, itself, and the bureaucratic self-interests of the Alaska Deep State.
By erasing the line between what politicians can touch and what they cannot, lawmakers are stealing from Alaskans to enrich unions, bureaucracies, and special interests that neither create wealth nor advance the future of Alaska, placing our savings, our dividends, and our children’s inheritance on the chopping block.
Alaska Permanent Fund hits record $85 billion, even as Alaskans see smaller dividends
Why the Two-Account Structure Matters
When Alaskans created the Permanent Fund, they built it with two chambers:
- The principal, protected in the Alaska Constitution. Article IX, Section 15 is crystal clear: “At least twenty-five percent of all mineral lease rentals, royalties, royalty sales proceeds, federal mineral revenue sharing payments and bonuses shall be placed in a permanent fund, the principal of which shall be used only for income-producing investments.” This money is locked away for all time.
- The Earnings Reserve Account, which receives investment earnings and can be spent by a simple majority of the Legislature.
This design has worked for decades. It locks the nest egg while still allowing sustainable draws through the Percent of Market Value (POMV) formula about 5 percent each year. The system isn’t broken. But merging the accounts would erase the firebreak. The entire fund would become fair game for short-term budget fixes.
As Sen. Robb Myers warned in his September 3 column in Must Read Alaska: “Combining the accounts is not protecting the fund. It is raiding the fund. It opens the door to overspending in ways Alaskans never voted for.”
What’s at Stake
Every billion dollars siphoned away today is gone forever. That means roughly $50 million in lost earnings every year, for all time. That’s money that could sustain dividends, fund schools, and maintain roads. Instead, it will vanish into the black hole of government overspending.
Already the ERA has been drained in lean years, proving just how fragile it is when lawmakers get desperate. If we merge the accounts, we invite the same pattern, only this time, with no lockbox protecting the core.
Make no mistake: this is how permanent savings die. Not in one dramatic moment, but drip by drip. Withdrawals justified as “temporary.” Promises made that tomorrow will be different. And then, suddenly, the savings are gone.
Lessons from Elsewhere
Other states and nations with resource wealth made these same mistakes. Venezuela, once among the richest oil nations, raided its petroleum revenues to fund short-term political promises. When oil prices crashed, the country collapsed into hyperinflation and poverty with nothing saved.
Closer to home, Alberta created a Heritage Fund like ours, but politicians steadily diverted the money into government budgets. Today, Alberta’s fund sits at only C$17 billion, while Alaska’s Permanent Fund, protected by our Constitution, has grown to over $70 billion.
Even U.S. states have squandered their resource wealth. Louisiana built a severance tax trust fund from its oil and gas boom, but repeated withdrawals drained it to insignificance. Wyoming’s Permanent Wyoming Mineral Trust Fund, while healthier, has been raided multiple times to fill budget gaps.
The lesson is clear: without strict safeguards, savings meant for the future are squandered, and the wealth of a generation is lost forever. These examples spent their savings as quickly as it came in, leaving nothing for the next generation. Alaska was supposed to be different. We had the foresight to set money aside, to create the most successful sovereign savings plan in the world. To tear down that structure now is to betray that vision.
A Better Path Forward
The solution isn’t to merge the accounts. It’s to strengthen the safeguards we already have.
- Keep the two-account system intact. It works, and it has protected Alaskans for decades.
- Constitutionalize the POMV draw. Guarantee that spending remains predictable and limited, without risking the principal.
- Require supermajority votes, or even voter approval, for excess spending. This keeps politicians from raiding the fund during a single bad year.
- Diversify Alaska’s revenue. Oil and gas still matter, but so do coal, critical minerals, fisheries, timber, and renewables. A healthy economy means less pressure to use the Permanent Fund as an ATM.
As Myers put it: “We don’t need to redesign the Permanent Fund to make it work—we need to defend the Permanent Fund from those who want to use it up.”
The Public’s Role
The Legislature works for us, not the other way around. If we let them bulldoze the Permanent Fund’s safeguards, we will lose the foundation of Alaska’s fiscal independence.
It is time to say enough.
Enough with the shell games.
Enough with draining our future to paper over today’s politics and its bureaucratic obesity.
Enough with eroding a legacy that belongs to every Alaskan today and tomorrow.
The Framers of the Permanent Fund saw beyond the next election cycle. They knew oil and gas wouldn’t last forever. They wanted to give Alaskans something that would. That vision has served us well for nearly half a century. To abandon it now would be an act of generational theft.
The choice is ours. Will we rise to defend our inheritance, or sit silent while political elites, devoid of true fiscal discipline, squander it before our eyes?
If we stay quiet, the Legislature will take that silence as consent. If we raise our voices, we can preserve the Permanent Fund as it was meant to be…PERMANENT.
Because once it’s gone, it’s gone. And so is Alaska’s claim to being “king of the hill” in resource stewardship.
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CASH US ALL OUT IMMEDIATELY GOD MOCKERS DO NOT DESERVE A PENSION
Why are unions always part of the problem?
Because of the communist, anti-Americans who run the unions……Democrats. They live off the backs of their members….and they live well.
I appreciate your article. I agree with you on preserving the PFD Fund. Safe guarding it is essential to its survival, and our responsibility to the future.
I think the limiting of the payout to the Alaska citizens is unjust. That needs to be corrected to payout the full amount as it was intended when the fund was created. I also think that dividends paid out from the fund to Alaska citizens should be tax exempt. I absolutely agree that limiting the Alaska Legislatures ability to drain the fund is an absolute must. 5% max drawdowns is critical to the funds survival.
Even if there’s 85 Billion, the Legislator shouldn’t plan to spend every penny of the 5% that’s up for grabs. They should only spend these funds if they clearly benefit all Alaskans. Not just a hand full of special interest groups. Or some Democrat political boon doggle like TDI or Trans crap. The Legislator hasn’t seen a pile of money they haven’t wanted to spend. Some mandatory fiscal restraint is needed to keep the fund’s targeted goals in mind, and not drain the fund just because they’re there.
Some times you have to look ahead, to the future and what we are going to leave our future Alaskans. We need to do the right thing. Because history will judge what we do.
Time for a divorce from these crooked politicians. Bastards have already stolen the dividend. Cash it all out to every eligible person. Then let the state have all the royalties from now on.
“……..Cash it all out to every eligible person………”
^^^ An image of the real problem.
Man. Our politicians are like dogs, drooling over some scrap of food! Where are the principled, ethical leaders that built our state, these days? Now, our ‘leaders’ constant focus is scheming ways to take ever more of our income, then blow it on nonsense.
This is an attack on the fund. But the other thing causing the fund the perform poorly is the fact that Alaska gives away its oil for among the lowest rates in the world. The billions we are losing in revenue from the sale of our oil (a finite resource) puts massive pressure on using the fund to fund state government. Right now the single biggest source of funding for government is the Alaska Permanent Fund.
An Alaska family of four has now lost over $70,000.00 due to SB-21 and the statutory formula not being followed.
Big Oil laughs all the way to the bank.
They will never cash the citizens out. They know to do so would mean their tax base would exit the state in mass exodus.
Four (4) percent maximum draw on the Permanent Fund – not five (5) percent which is shown to be not sustainable. Unless you fire all the board members and then all the fund advisors, financial “advisors/firms” that are charging the State of ALaska for their services. Then re-invest the PF in passive index funds (S&P 500, Dow Jones, NASDAQ and bond funds @ 25% each) and let it ride.
Have accountants (state paid accountants-crunching numbers is not rocket science) calculate the prior year’s rate of return annually, 50% of any earnings go into the PF and 50% goes to SOA and citizens eligible for the PF divided equally (i.e. 25% each). Easy peasy. Well, not so easy since legislators would not pass a bill to implement this scenario. Oh well, a man can dream.
This will probably be the last year we will enjoy a PFD payment.
I’m in favor of combining the 2 parts of the Permanent Fund, because that’s how other giant POMV wealth funds do it.
The above article says (regarding the Permanent Fund structure as it exists now):
“This design has worked for decades. It locks the nest egg while still allowing sustainable draws through the Percent of Market Value (POMV) formula about 5 percent each year.”
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From the above statement, it seems like the article is in favor of the POMV system (which was established by the legislature in 2018). I think the POMV system is good, because by averaging the last 5 years of the entire fund’s value, and then taking 5% of that average, the annual harvest is much more stable and predictable, than by taking a percentage of volatile up and down earnings.
The article’s main point seems to be that it does not want the harvest to dip into the principal, thinking that that would be the start of a gradual long-term slide into diminishing the fund. But what if most of the Earnings Reserve Account has been plowed back into the principal so as to maximize the earnings? What if one year there is accidently not quite enough in the ERA to provide for that year’s annual 5% draw? That would cause a big problem with the legislature’s budgeting process and the paying out of PFDs. It is sensible to be able to draw from the entire fund, to prevent disruptions and unpredictability.
The important thing is to establish a maximum percent annual draw rate in our constitution, and never exceed it. And if some think that 5% is a little too much, then it is OK to establish the annual maximum draw at 4-1/2% or whatever is proper and prudent.
Biggest chumps in all of this?
Village residents who send Dems to Juno, who then reduce ALL the PFD checks being sent to village families.
Juno/Dems do this to have more money to give to teachers (& other state “servants”) in those villages, while the teachers are the richest people in town.
Why do village residents vote this way? How brain washed are them by the Democratic Party?
Except for schools, almost all costs (housing, health care, H Start, water/sewer, airstrip, SNAP etc…..) are covered by the Federal Gov.
Rural AK could use the PF money more then most of us, yet they vote to reduce the checks?
Senator Myers was born in 1982, all he has known is no State income tax and school tax and the PFD. That says it all, never in the real world, just hand out times.
Senator Myers was born in 1982, the times of no State income tax and school tax and the PFD. That says it all, living in the hand out times.