Permanent Fund's reserve account drops drastically - Must Read Alaska
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Saturday, September 19, 2020
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Permanent Fund’s reserve account drops drastically

The Alaska Permanent Fund Earnings Reserve Account, where the Alaska Permanent Fund dividend is drawn from, has dropped in value over the past quarter.

While in May, there was $17.6 billion in the ERA, a note from the Fund reports says it is down to $8.4 billion. But it’s actually down even more. A lot more.

The actual realized earnings of the account are now just over $3.09 billion, with unrealized gains at $1.3 billion.

That’s because on July 1, the state operating budget took a draw of $3 billion.

The ERA will have an estimated $5.3 billion available for future appropriation, according to the fund.

That is a seriously low number for state budgeters to work with over the coming years.

The rate of return for FY 2020, which ended in June, just over 2 percent. Markets in general have crashed across the globe due to the current pandemic, so the Alaska Permanent Fund is not alone in that regard.

At the end of the fiscal year, the entire fund, which is a result of oil royalties that go to the state, stood at $65 billion. But most of that is untouchable. Only the Earnings Reserve Account can be used to pay dividends to Alaskans and to shore up state services, via a method called the Percent of Market Value, or POMV.

The low balance in the Earnings Reserve Account means next year’s budget will have little to draw upon. Permanent Fund dividends will be competing with state spending. And in future years, with the fund’s low rate of return, Alaskans can expect smaller dividends. This year’s dividend was $992.

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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.

Latest comments

  • The thieves are doing exactly what we knew they would do, rob the fund until it’s gone.

  • Part of this is the irresponsibility of those who voted to put millions from the ER into the PF. I would say they were very short-sighted, but personally I think they had an agenda to get rid of the PFD.

    • Alaska is a state in financial distress. Yet it still continues to give unearned money (ie, the PFD) to its populace. It is silly artifact from days when money flowed freely into the state’s treasury. To receive a PFD there is no means testing. Children and infants receive a PFD., and for the most part it is spent by their parents. Active military throughout the world, with no intention of returning to Alaska, receive a PFD. Snow birds who claim to have spent less than 180 days in Arizona, Florida and other such states, receive a PFD. It makes no sense to talk about balancing the state’s budget with new taxes while simultaneously continuing the PFD program.

  • You can expect taxes as well.

    • Oh, yes – for those left in the state a couple years from now.
      But it was fun while it lasted!

  • Guess they won’t stop spending until there is nothing left. Better start firing the current legislators at the ballot box, or taxes will be next.

  • So it goes. No one is watching the foxes guarding the hen house or holding them accountable. No PFD for you, never mind the 5 year rolling average of the Permanent Fund which is “supposed” to be formula to statutorily provide the Dividend to the citizens of Alaska.

  • There it is. “The state operating budget took a draw.” Stated another way……..Democrats and phoney Republicans took the “people’s money” and used it to further fund big government and all of the drones who suck off the teet of big state government. IE. Government first, NOT the people.
    Thank you for reporting this Suzanne. And I hope to God that Democrats lose control of the State House, and Cathy Giessel gets tossed on her a$$

  • Recall Dunleavy. That’ll fix things.

    • Tongue-in-cheek, Peepee. We know that you really meant……investigate Bill Walker for corruption and graft.

      • Interesting that all of these Bill Walker disciples seem to be weeding themselves out of politics, never to be heard from again. Byron Mallott. Gary Knopp. Bill Walker. Who’s next………?

    • Recall Bryce. Fixed it.

  • Unaudited, as of market close on Tuesday August 4, 2020
    We are back to…66.5 Billion…See below we are holding steady during this virus ridden economy and we will be back. Keep the average earnings of 6.44% down from 7.14% last Quarter the Average earnings will be strong because it is over five years. The sky is not falling, recognize the full earnings and stop forward funding state budgets with our earnings. Use the half available as it has always been and stop scarring the people we will have a strong economy if we invest in our resource dveleopment.
    PORTFOLIO NAME
    TUESDAY AUGUST 4, 2020
    Stocks
    $26,989,700,000
    Bonds
    $13,608,500,000
    Private Equity
    $9,583,100,000
    Real Estate
    $4,666,000,000
    Private Income and Infrastructure
    $4,715,900,000
    Absolute Return
    $3,854,300,000
    Risk Parity
    $619,500,000
    Cash
    $2,480,700,000
    Total
    $66,517,700,000

    • If percent of Market value was based on the five year average earnings then maybe if you paid half out with inflation proofing, then your formula would be good to go. But when you base it on a POMV formula alone your formula will fail, because it has to change based on market conditions or your earnings will go away, and that is only if you pay half to the people and half to responsible government ie building infrastructure and developing natural resources…

  • We need a reserve CORPUS account because if we transferred all the earnings into the CORPUS then we are changing the fund without the peoples consent. They want to limit our draw without limiting their spending. NO PFD earnings caps without a vote of the people. No PFD earnings CAPs or transfers without equivalent budget reductions. AND no earnings changes without a vote of the people. We do not agree with these limiting transfers that reduce our draw without our vote..Hammond 50-5o or no deal…

  • Shouldn’t the title of your article be AKLEG transfers away 5 Billion and forward funds 3.1 Billion of your hard earned earnings based on a POMV model and a faulty earnings approach to budgeting. Return the 5 Billion from the CORPUS and stop playing accounting games.

  • If there ever was a reason to tap the PF this seems to be the one. When Giv Hammond pushed created the fund I am pretty sure he did not want it to be untouchable for ever. What would be the point if that. What better reason can anyone think of to use some of the fund now. The world has been turned upside down, all in about a half a year. GDP is down 1/3. Unemployment at all time lows. Alaska has suffered as much if not more that the rest of the country. Surely these are valid reasons to use some of the fund to help weather the storm. Law makers and the general public should ask themselves. If not now, when.

    • When to draw on the Permanent Fund you ask? The answer is when the annual draw is offset by fund earnings, and earnings is defined as CPI plus 2%. The fundamental problem with allowing politicians to draw on the fund is that they will behave irrational with other people’s money just as they did in the halcyon days of oil revenue. After all, the best drug in the world is spending outer people’s money.

  • Keep in mind that if Senators Natasha Rasmuson Von Imhof and Bert Stedman would have had their way a year ago, the undistributed income account of the Permanent Fund might be fully depleted by now. Fortunately, Governor Dunleavy recognized the folly of that approach and deserves our thanks.

  • If you vote for the GOP, you will lose what is left of your PFD.

    • LOL

  • All of these letters are missing the point we need to reduce spending if we don’t reduce spending it doesn’t matter how big the check because the legislatures will drain it reduce spending quit playing modern mouth and tell the truth.

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