Permanent Fund earnings could run dry by 2026

Permanent Fund earnings could run dry by 2026
Published: Jul. 13, 2023 at 8:05 PM AKDT|Updated: Jul. 13, 2023 at 8:37 PM AKDT
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ANCHORAGE, Alaska (KTUU) - A new study shared on Wednesday by the Alaska Permanent Fund Corporation shows that the state could be running out of funding for the Permanent Fund Dividend by the 2027 fiscal year.

During a regular APFC Board of Trustees meeting this week, CEO Deven Mitchell presented three scenarios of how the next upcoming fiscal years could go — including one in which the state would run out of funds generated by Permanent Fund earnings in the next few years.

“With the assumptions that were made, in the low case scenario there was a failure of the earnings reserve account to be able to provide for the transfer to the state of Alaska in the fiscal year 2027,” Mitchell said. “This low case scenario is actually, it requires better performance than we saw in 2023 for a statutory net income perspective.”

If this occurs, Mitchell said the state could be seeing no Permanent Fund spending money by the 2026 fiscal year. The Permanent Fund itself would still exist, but would not be substantial enough to withdraw dividends for residents or provide for state services.

“That would be a worst, worst-case scenario — a doomsday scenario,” Mitchell said.

The current progression of the funding has been a hot conversation among Alaska lawmakers for years. Sen. Bill Wielechowski said he has been watching the fund slowly dry up over the past few years.

“It’s just basic math,” Wielechowski said. “The state is pulling out more of the earnings than are coming in.”

If the Permanent Fund earnings are exhausted, Wielechowski says the outcomes would create a crisis across the state. Alaskans would no longer receive their annual dividend — which many have relied on for decades — and state funding would vanish. According to Wielechowski, it would affect the Alaska Court System, public safety and education.

“Dividends are something that Alaskans have relied on for decades, and it helps draw out tens of thousands of Alaskans out of poverty,” Wielechowski said.

An Institute of Social and Economic Research at the University of Alaska Anchorage report titled “Permanent Fund Dividends and Poverty in Alaska” shows the Permanent Fund dividend has a direct impact on decreasing poverty in the state — especially in rural areas.

“Our estimates reveal that the PFD has reduced Alaska poverty rates by 2.3 percentage points on average over the past five years; about 25 percent more people would have fallen below the poverty threshold without the PFD,” the report said. “PFD has remained much more important in reducing poverty in rural Alaska than in the urban areas of the state. Without the PFD, more than one in five rural Alaskans would be pushed below the poverty threshold.”

The report also indicates that as the Permanent Fund decreases, it has less of an impact on poverty reduction.

In case of a doomsday situation, APFC said it would work alongside policymakers to come up with a solution.

In a statement, APFC’s Board of Trustees Chair Ethan Schutt wrote that, “In anticipation of a market cycle such as the one we are currently in, the Board of Trustees has been on record for more than 20 years to transition the Fund from its current two-account system to a one unified account system, which would protect the intergenerational sustainability of the Fund to provide for all generations.”

APFC said the topic will continue to be discussed in the next meeting scheduled for September and throughout the fall.