By AlaskaWatchman.com

In Fiscal Year 2020, the net income of the Alaska Permanent Fund was $1.63 billion while the Percentage of Market Value (POMV) draw was nearly $3 billion, a loss of about $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 recently projected in the fall forecast released by the Commissioner of Revenue.

The earnings of the Permanent Fund reported should not include special restrictions on income and expense.

Permanent Fund earnings 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 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 a sale. Unrealized losses are the opposite. Each of these has the same effect, to reduce our dividend. None of them have been approved by the shareholders, Alaska’s people.

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.

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. They claim 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 forecasts 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 as 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.

The views expressed here are those of the author.

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‘Awash with cash’ Alaska has money to pay a full Permanent Fund Dividend

Jim Crawford
Jim Crawford is a third-generation Alaskan entrepreneur who resides in Anchorage. The Alaska Institute for Growth is a local think tank which studies and reports on and may sponsor projects of sustained economic growth for the Alaskan economy. Mr. 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.


12 Comments

  • Brandon says:

    “The actual earnings are still sitting in the Earnings Reserve Account.”
    Exactly….. like when they said we are in a budget crisis, didn’t plow our roads(They were BAD), garnished our PFD without the consent of the people, and stashed it away for their own purposes.
    The double standard with what the average citizen is held to account verse what goes on in our local governing bodies is.. deplorable.

  • Proud Alaskan says:

    Remember it’s the LAW to distribute a full PFD
    End of Story

  • Natural Alaskan says:

    After watching the circus that is our legislature, it should be obvious to all that this can only be fixed at the constitutional convention. Vote YES for it in 2022.

  • lenny peterson says:

    why are legislatures against putting the pfd dilima on the ballot,,,,,,,hmmmmmmm

  • Amanda Major says:

    It’s just really hard for some of us to understand all the numbers. It’s really frustrating!

  • William says:

    What gets me is why is it still in the “restricted” earnings reserve account. If they want to keep it, it should be reinvested into the fund to be truly protected. “Resticted” means they use it when they overspend. They just depleted the reserve account a few years ago (stupidly) so they are replenishing it. In other words the government is taking much more of the earnings than they say.

  • jh says:

    Too bad we don’t have Governor Hammond. He was the best of the best. Integrity and honor. Nobody yet has come close to be like this GREAT and VERY LIKABLE MAN!

  • JH says:

    I MISPELLED LIKEABLE

  • NAV says:

    What amazes me is how ignorant the people of Alaska are in the fact they don’t watch what their legislators do behind closed doors, they allowed Dunleavy and the legislators to cram SB 76 down the necks of Alaskans without a peep except for one Legislator who had the integrity to say something about combining the permanent fund with the general fund which allowed them to turn it into their personal slush fund. Hammonds calculation are no longer relevant. Then Dunleavy gave along with the legislator except one opposing it constitutional authority to an UNELECTED official. It takes awhile to uncover lies and deception but the 1st speaker at the symposium that Senator Reibold put together stated facts that have been vetted and will come out soon and Alaskans are going to be shocked when this goes public. Everyone was warned and they think they can hide because of their political positions but not one is exempt and Alaskans are going to be shocked on how high this corruption goes.

  • NAV says:

    I love it when you censor the truth, partial facts liberal narrative

  • Debi Kirchner says:

    So does this mean that we are going to have to sue the legislature to get our money?

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