Alaska News

Despite losses, PFD distribution still likely

Chances Alaskans will receive a Permanent Fund dividend this year are looking solid, despite the fearsome decline in global stock markets. But expect the payment to be much smaller than last year's $2,069.

Mike Burns, executive director of the $27 billion state savings account, said the fund has ample available profits on hand to make the payments this fall.

The only way that could change is if investment markets, hammered down since last fall, sustain much deeper losses -- an "extraordinary market event" -- between now and the end of the state budget year on June 30, Burns said.

Roughly $1 billion will be needed to pay dividends, Burns said. Right now the fund's subaccount for paying dividends holds about $3.4 billion.

Odds for a dividend also are looking good for another reason -- a legal reason.

Michael Barnhill, an Alaska assistant attorney general, said Friday he's nearly finished his review of a 2003 state legal opinion on the Permanent Fund and dividends, and he believes the 6-year-old opinion is valid.

That opinion laid out a rationale for how dividends can be paid in accordance with Alaska law, even in times when the value of the fund's stock, bond, real estate and other investments dives to levels at or below the value of the fund's constitutionally protected deposits, known as the principal.

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Those deposits have totaled $29.6 billion since the fund started in 1977. But the fund's investments today are worth just $27 billion. The opinion says the dividend can be paid anyway in such circumstances if the dividend subaccount has the money.

Burns as well as state Revenue Commissioner Patrick Galvin, who sits on the fund's board of trustees, said Friday they're pleased with Barnhill's preliminary assessment that the 2003 legal opinion is correct. As the world's financial markets were plunging late last year, the board asked for the attorney general's review.

"I agree with Mr. Barnhill," Galvin said. "The reasoning behind the 2003 decision, to me, seems sound."

But not everybody likes the legal opinion. Some legislators, as well as Juneau economist Gregg Erickson, voiced dissenting views at a recent hearing.

Anchorage Democratic Rep. Mike Doogan, in a recent newsletter, suggested it's improper to pay dividends when the fund principal is dropping.

"Why would we spend the fund into oblivion? Because no governor wants to be the one to say: Sorry. Really bad year in the market. No dividend," Doogan wrote.

The amount of this fall's dividend won't be known until all of this year's investment results are tallied. The dividend is based on an average of the fund's profits and losses over a five-year period.

Last year's record $2,069 dividend was sweetened further with an extra $1,200, which state legislators and Gov. Sarah Palin tacked on as a one-time "resource rebate," or share of the state's oil revenue surplus.

This year's dividend is expected to be much smaller than last year's, but it appears likely to exceed $1,000 per resident.

The state has paid Permanent Fund dividends to Alaska residents, including children, since 1982.

Lately the fund's investments have taken a hard hit as the global economy staggers through an economic crisis.

In the fall of 2007, the fund value topped $40 billion, but now stands at about $27 billion -- a 33 percent drop. The stock market swoon since last September accounts for much of the decline.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

By WESLEY LOY

wloy@adn.com

Wesley Loy

Wesley Loy is a former reporter for the Anchorage Daily News.

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