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ANCHORAGE - The principal of the Alaska Permanent Fund can't be touched, even to pay dividends, under the Alaska Constitution.
But just how you define "principal" could determine whether this year's dividends will be slashed, or maybe not paid at all. As a result, the audit committee of the Alaska Permanent Fund Corp. wants an opinion from the state attorney general on the issue.
Using the permanent fund's current definition, there's only $283 million in the fund that could be used for dividends, based on Wednesday's market calculation. That would mean a dividend of about $470 for each Alaskan.
The actual determination doesn't come until June 30.
Between now and then, the stock market could erase the dividend entirely or push it back to around $1,140. In the roller-coaster world of high finance, the fund's value can rise or fall by $100 million or more in a single day.
The fund's protected principal has been defined over the years as the amount collected from oil revenues, plus legislative appropriations and inflation-proofing. Amounts beyond that can be used for dividends, or appropriated by the Legislature, though the latter has never been done.
By the time June 30 rolls around, the protected principal by that definition will be a little over $22.2 billion. The market value of the fund on Wednesday was just under $22.4 billion. The difference is the $283 million available for a dividend.
But that's under the current definition.
The permanent fund corporation has assumed it can't pull money out of the fund for dividends if that would push the market value below the protected principal amount.
But can the corporation's board ignore the market value and simply pay out money that's been earned from dividends, interest and the like? By June 30, there most likely will be enough money in the earnings account to pay the higher dividend.
"The question is, 'Do we have an accurate definition of principal?' " said Robert Bartholomew, chief operating officer for the fund corporation.
That's the basic question the audit committee wants the state's lawyers to answer. The audit committee, three of the fund board's seven members, can only make a recommendation. It's up to the full board to decide whether to ask for the attorney general to consider the question. That could come next month.
"We believe the issue needs to be clarified," permanent fund executive director Bob Storer told the Anchorage Daily News. "It's important that ambiguity be eliminated."
Attorney General Gregg Renkes, who is a fund board member but not a member of the audit committee, said Wednesday his office would write an opinion if asked.
"It's our obligation," he told the Daily News.