Input sought on new PFD proposal

WASILLA -- Sen. Ralph Seekins, R-Fairbanks, was in Wasilla Wednesday as part of a community tour seeking to let Alaskans know about a proposed change to the way the Alaska Permanent Fund is managed.

A public hearing was held at the Legislative Information Office in Wasilla that evening to discuss two bills relating to the permanent fund. Seekins, the chair of the Senate Judiciary Committee and a former member of the Alaska Permanent Fund board, hoped to get public comment and provide education about Senate Joint Resolution 18, a proposal to turn the fund into an endowment setup.

The bill was introduced during the last session, where the Senate State Affairs Committee offered up a substitute for the bill originally sponsored by the Senate Rules Committee, at the request of the Joint House and Senate Legislative Budget and Audit committee. The substitute was referred to the Judiciary Committee, but wasn't passed before the session came to a close. Seekins said his committee is touring with the bill now to get more information out about what it would mean for Alaskans without the time pressures of the legislative session.

Seekins characterized the bill as a way to remove the politics from the decision of how much the Permanent Fund Dividend checks are each year. Currently, he said, the annual market value of the permanent fund remains relatively the same, while the realized income -- what is sold by the board to bring in the money to be, eventually, distributed in PFD checks.

"What we do now is take the money available from the permanent fund and, after inflation-proofing, pay 1/5 of the income over the past five years," Seekins said.

But realized income, he said, involves selling investments off in order to make profit. That method, he said, is contrary to typical investment philosophies. It also puts the decision of which investments to liquidate on the shoulders of the six-member board, all of whom are appointed by the current governor.

"They're six political appointees. The governor can remove them at any time," Seekins said. "I'm not confident we can invest the fund according to political volatility."

The bill, Seekins said, would change the fund to put the responsibility of determining how much of the annual market value of the fund is put into dividends on the shoulders of the Legislature. The bill states that annual appropriations "may not exceed 5 percent of the average market values of the fund …"

That's not to say it can't be less than 5 percent, Seekins said. He doesn't believe, he said, it would suit anyone to tie the hands of the Legislature and risk having to pull money from the balance of the fund to pay out a dividend, or to not be able to fund a catastrophic disaster, were one to take place in the state.

Seekins said he believes the strength of the permanent fund will allow for enough money to be paid out each year, and for automatic inflation-proofing.

"Over the long term, the fund has averaged 8 percent, leaving 3 percent for inflation-proofing," Seekins said. "Over the last 20 years, we've always hit that 8 percent."

The strategy would also mean PFD checks wouldn't vary in amount as much as they do under the current method.

"You can't tell what it's going to be from year to year," Seekins said. "The decision can be economic or political."

It wouldn't necessarily mean smaller checks, either, Seekins said. This year's check, figured under the current method, started out as $691,000 and was distributed to about 600,000 applicants. If this year's check had been distributed under the proposed method, it would have been about $1.25 billion split 600,000 ways, or $2,083.33 each.

The new proposal, he said, has been kicked around by the permanent fund board since about 1989. It's based on models he said have been proven over time.

"What this does, is emulates the process used by about 85 percent of the large endowments across the nation," Seekins said. The Rasmussen Foundation, an Alaska-based foundation, operates under a similar method, he said.

But more to the point, he said, it would place the decision of whether and what percentage of the permanent fund should go toward dividend checks in the hands of 60 legislators, not six political appointees.

"It's a more politically secure option than what we currently have on the table," Seekins said. "I would prefer to put my trust in the legislators, because those people answer directly to the people in their regions."

Seekins said the intent of the Wednesday meeting was to acquaint people with the idea of the change.

More information about SJR 18, also referred to as POMV or percent of market value legislation, is available on the Senate Judiciary Web site at www.akrepublicans.org/senjud, or at the Alaska Permanent Fund Corporation's Web site at www.apfc.org. Alaska voters can send public opinion messages to the committee through the Alaska Legislature home page at w3.legis.state.ak.us, or by contacting the local Legislative Information Office at 376-3104.

"We're trying to get people to understand it, to discuss it," Seekins said. "We want them to understand it -- what it really is -- and see if they think it's a good thing. We're finding out that, when people find out what it is, their initial opposition to it fades."