Economists predict it would cost about $4.3 billion to repay the previously reduced dividends

ANCHORAGE (KTUU) — Economists predict it would cost about $4.3 billion to repay the previous, reduced dividends as well as pay this year's check. Additionally, they say, the state recession will end this year.

Both issues were discussed Wednesday during a panel discussion on forecasting the future of Alaska's economy and the Permanent Fund.

Three economists spoke, including Dr. Mouhcine Guettabi an associate professor of economics at the Institute of Social and Economic Research.

"The earnings reserve certainly has enough money for that withdrawal," Mouhcine said. "It would require about $4.3 billion to both pay back the historical dividends and to pay the 2019 dividends using the statutory formula. So you would need $2.3 billion dollars to basically pay back the '16 '17 and '18 dividends, or difference between what the dividends would have been and the dividends that were paid out."

Mouhcine says using the standard dividend formula, a full dividend of $2,042 would have been paid out in 2016, $2,313 in 2017, and $2,845 in 2018. He predicts this year it will be $2,932.

Mouhcine says that while it can be paid out, the earnings are more tied than ever to the performance of the stock market and the broader U.S economy.

"Of course the earnings reserve has grown quite a bit — it has $17 or $18 billion so it can potentially withstand that withdrawal," Mouhcine said, "but we have to also think about money that will need to be withdrawn to fund state government and money that should be used to inflation proof, or protect the real value of the fund."

The value of the fund as of Jan. 3 was $61 billion.

He says the fund has averaged 9.73 percent in returns.

Meanwhile, all three economists agreed the state recession would end this year, but they were divided by how much it would recover.

State economist Neal Fried also says more people continue to leave Alaska rather than move here. Fried predicts that the health care, leisure and hospitality, and oil and gas development sectors will gain jobs in 2019. He says projections show that jobs in transportation and government will likely decrease.

"Local government is a new loser, it just stared losing this year," Fried said.

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