A new approach

Posted: Sunday, January 27, 2002

The $25 billion Alaska Permanent Fund's reserve and earnings - the dividend program - are seriously threatened by a potential legislative raid intended as the primary means to shore up the state budget deficit.

Therefore, I propose a revitalization of the vulnerable old fund by suspending the dividend program for four years during which time a constitutional amendment would shift ownership of about $25,000 of your public portion of the fund from the state to an individual account bearing your name. Your new account would continue to be invested and managed by the very same professional managers as before, who would then be working on behalf of 650,00 individual Alaskans to build long-term growth, eventually providing each Alaskan with an IRA, business, education or construction fund, etc.

However, traditionalists desiring to continue a yearly dividend may do so, but it would be deducted from their initial $25,000

For everyone else, during those four or five years of "tough-love" your dividend "value" will actually be multiplied. Initially your new account will always grow faster than the yearly dividend value; doubling within five years, increasing rapidly thereafter - especially if the account holder arranges automatic small $50-100 monthly deposits, with possible matching dollars from organizations, unions, employers, etc. In 10 years your basic "conservative" 8 1/2 percent (permanent fund projections) account should equal $70,000. The 10 percent (historical) $100 per month "growth" account should become $85,000; in 15 years $160,000; in 20 years a quarter-million ($150,000 in today's dollars).

Great education account for kids!

After the four- or five-year transition period, those residents who desire may then "legally" claim their account and withdraw, or cash-in, at about 20 percent yearly for a full 100 percent withdrawal over the next five years.

Additionally, long-residing seniors would receive a one-time, immediately available, longevity-bonus of up to $12,500.

A $1 billion interest-bearing account would be established for newborn Alaskans, providing each $1,500 yearly until age 17 or the year 2020, whichever comes first.

A state personal income tax wouldn't be required because the remaining $7 billion fund would provide $600 million of yearly interest for the state.

Questions? william.slone@acsalaska.net

W.L. Slone

Homer



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