The latest History and Projection report from the Alaska Permanent Fund Corporation reveals some interesting data. The statutory Permanent Fund dividend (which has not been paid since 2015) would consume over 80% of the structured draw that was passed by the Legislature in 2018. The report includes the FY 2022 actual Percent of Market Value (POMV) draw, the actual FY 2022 statutory dividend, the FY 2023 actual POMV draw, and the projected FY 2023 statutory dividend.
The statutory dividend for FY 2022 is just over $2.5 billion, which would translate to an approximate $3,500 dividend. The POMV draw – which limits the amount of Permanent Fund earnings the state can spend – is just over $3 billion for FY 2022. Meaning if a full PFD were paid, only $559 million would be left from the POMV draw for state spending. In that scenario, the budget deficit would be around $2 billion. For FY 2022, the statutory dividend is almost 82% of the POMV transfer. Since former Governor Bill Walker vetoed the dividend in 2016, a full statutory dividend has not been paid. The Alaska Supreme Court ruled that the dividend is ultimately subject to legislative appropriation.
The actual POMV draw for FY 2023 is over $3.3 billion. The projected statutory dividend for FY 2023 is nearly $2.7 billion, which would translate to an approximate $3,800 dividend. The five year average for the POMV draw starts one year before the previous fiscal year. FY 2023 is the first year the POMV includes the more than $80 billion ending balance for FY 2021. The calculation for the statutory dividend is the previous five fiscal years, so FY 2022 net income is a projection. For FY 2023, the statutory dividend is projected at just over 80% of the POMV draw.
The POMV draw is calculated by taking 5% of the ending fund balance from the average of the five previous fiscal years (starting one year before the current fiscal year). The statutory dividend is calculated by taking the average statutory net income from the Permanent Fund for the previous five fiscal years, and then dividing that amount by two. The POMV statute and the dividend statute, which are both on the books, are in conflict.
Governor Mike Dunleavy (R – Alaska), who has long promoted the statutory dividend, came out with a new plan earlier this year. He wants to put the Permanent Fund in the Alaska Constitution and then split earnings 50/50 – 50% for dividends and 50% for state spending. But that requires 2/3 of both the House and Senate agreeing, and the voters approving the constitutional amendment.
If the 50/50 plan were in place, and the draw remained at 5%, there would be approximately $1.5 billion for dividends and $1.5 billion for state spending for FY 2022. That would translate to an approximate $2,100 dividend. But with only $1.5 billion for state spending, the state would face a nearly $1 billion deficit. This is based on an estimated $2 billion from oil taxes and other state revenues, and a $4.5 billion budget.
Some legislators have suggested a state income or sales tax to help close the deficit. Some have suggested raising oil taxes. Others say it should be a combination. While others say without a dividend, the state would be at a surplus with no personal taxes. The issue has plagued the Legislature for the last five years. Dunleavy has yet to introduce any revenue measures, though his Department of Revenue recently asked the Legislature’s fiscal plan working group to present some ideas.
The other interesting projection from the report is what the Permanent Fund estimates what the the balance of the fund will be in FY 2030. Based of a 6.4% return, the value of the Permanent Fund would top $100 billion by FY 2030.