Lawmakers debating multi-billion dollar transfer to the Permanent Fund corpus

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JUNEAU, Alaska (KTUU) - Lawmakers are debating proposals that would see billions of dollars transferred to the constitutionally protected portion of the Permanent Fund, an account that requires a vote of the people to spend its funds.

Some lawmakers and the governor are waiting to hear further evaluation and analysis about how the plan could impact future Permanent Fund Dividends, and the Permanent Fund Corporation itself before committing to approve it.

There have also been concerns raised that transferring those funds could have a negative impact on the state's liquidity.

In April, Sen. Bert Stedman, R-Sitka, and Sen. Natasha von Imhof, R-Anchorage, introduced an amendment in the Senate Finance Committee that would transfer $14 billion from the Earnings Reserve Account of the Permanent Fund to the constitutionally protected part of the fund.

The $14 billion figure was dropped to $12 billion after an amendment was added by Sen. Peter Micciche, R-Soldotna, over concerns it was too large. The Senate passed that provision as part of its operating budget that is currently being debated with the House.

The ERA has grown exponentially to around $18 billion. It requires a simple majority from both bodies to spend and there is a concern in some quarters that it could become a savings account of last resort.

The Constitutional Budget Reserve, a savings account used by legislators, has been relied on heavily in recent years, dropping from $10 billion in 2015 to a balance today of around $2 billion.

Stedman says the $12 billion transfer, plus nearly a $1 billion for inflation proofing, would help ensure Alaska’s prosperity and that the ERA isn’t treated like the CBR by lawmakers.

Following historical growth figures, Stedman calculates that the $13 billion deposited today would grow to “$19 billion in 10 years, and $28 billion in 20 years,” even with withdrawals for dividends and state spending.

“That will have a huge impact for the grandchildren of the residents of Alaska today,” he said.

Jonathan Kreiss-Tomkins introduced a similar proposal in the House that would transfer $5 billion to the corpus of the Permanent Fund. That figure grew to $8 billion after debate in the House Finance Committee.

“I think there's an emerging consensus that this it the right thing to do,” said Kreiss-Tomkins.

The governor is taking a wait-and-see approach to the transfer provision approved by the Senate.

“We're taking a look at that, we're analyzing that,” he said. “To see what impacts that would have on the operations of the Permanent Fund Corporation as well as future PFDs, under the two sets of statutes the administration believes should be followed.”

The governor believes that the Legislature should follow the statutory formula that determines the size of the annual dividend. He also believes lawmakers should follow a law passed in 2018 that sets the percentage drawn from the Permanent Fund to pay for dividends and state services.

He says a vote of the people should be required if the statute relating to the size of the PFD is to change.

Micciche echoed the governor, saying he was waiting to see analysis from the House and Senate as to the impacts of a major transfer. The ERA is used to pay out dividends and Micciche is concerned drawing down the fund might make a PFD conversation inevitable.

“I don't want to force the PFD discussion because the money is not there, I want to have that discussions with Alaskans,” he said.

Stedman says the $12 billion transfer would not impact future dividends as there would still be billions left in the account with more money added annually by earnings derived from the corpus.

At the time of introducing the amendment, Stedman and von Imhof said that it would force a decision on the future of the Permanent Fund and how much is drawn for state services and how much is delivered annually for a dividend.

For Stedman, the priority remains locking the funds away in a place that is very difficult to spend.

“Defenders of the Permanent Fund will prevail in this argument,” he said. “We are not going to spend the Earnings Reserve for the current generations of Alaskans, this is for our grandkids.”

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