Sure-fire plan to preserve the Permanent Fund

Keeping the Permanent Fund permanent means reducing the amount we withdraw from it each year.

Instead of taking our 5 percent a year, put a schedule in place to reduce it to 4.5 percent by 2033. Keeping more money in the fund is the best way to improve the chances of future growth, a lesson we should have learned years ago from the Norwegians.

Senate Bill No. 274, which is up for a hearing Wednesday at 1:30 p.m. in the Senate Finance Committee, would create a stairstep reduction starting in 2029. This bill is an important one.

Sitka Sen. Bert Stedman, who has expertise in this area, says that preserving the purchasing power of the fund for future generations should be one of our priorities. It won’t happen unless we plan for it.

Callan Associates, a consultant for the Alaska Permanent Fund Corporation, says that by reducing the percentage annual withdrawal in the short term, there would be more money available in the longer term because the fund’s market value would be significantly larger.

“Because less is distributed each year, more earnings remain in the Earnings Reserve Account, causing the balance under this bill to grow significantly relative to the current policy—from a $265 million higher balance in FY2029 to about $3.3 billion by FY2035. These retained earnings also translate into a larger overall Fund value, with the gap widening steadily from $88 million in FY2029 to ~ $2.9 billion by FY2035,” the fiscal note to the bill says.

Reducing the percentage draw from the fund is only part of the challenge, however.

The harder part will be instituting new taxes to make up for the hundreds of millions that would not be available to pay for state services. And deciding what to do about the Permanent Fund Dividend.

But we should not allow the tax and dividend problems to prevent action on excessive withdrawals.

Gov. Mike Dunleavy tossed out some new ideas on taxes this year, but it’s clear he wasn’t serious and has made no effort to sell the ideas to the public or the Legislature. He also contributes nothing to the dividend debate.

With Dunleavy in absentia on the fiscal plan, most of the Republicans in the Legislature are willing to follow his guidance.

I wrote here on February 8 that the plus side of the half-hearted Dunleavy tax plan “is that Republican candidates for state office will be unable to repeat the nonsense that Dunleavy relied on in 2018 and 2022.”

I now think that was a foolish thing for me to say. The Republican candidates for governor are repeating the same budget nonsense that Dunleavy relied on to win two terms as governor.

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