ANCHORAGE - A ban on tapping the principal of the Alaska Permanent Fund, now enshrined in the state constitution, could be eliminated under a proposal backed by some of the fund corporation's trustees. They want the fund to work more like an endowment, with a maximum of 5 percent allocated to dividends and other purposes.
Alaskans are worried there won't be any money for dividends next year because of the down stock market, and both major candidates for governor have endorsed the endowment idea, which wouldn't affect the way the dividend is calculated.
"Personally I think it's a good idea," said Wilson Condon, state revenue commissioner and a member of the board, "as long as it's limited to 5 percent of the five-year average (of fund assets) or less. That way it would be run the way a responsible endowment would be run."
The trustees have been backing the endowment approach for several years, asking the Legislature to approve a constitutional amendment that would be submitted to voters. But lawmakers have refused.
Even so, the proposal legislators left on the table last year didn't change the constitution's prohibition on using principal for anything but investments. The trustees will consider a proposal on that at their next meeting.
The fund assets now stand at $21.3 billion based on Wednesday's markets. That's more than three-quarters of a billion dollars short of the $22.1 billion that will be labeled as untouchable principal next June 30. As for any money beyond that figure, just half can be distributed as dividends.
The $22.1 billion principal is calculated by adding the accumulated oil revenue, additions made by the Legislature, and money added for inflation proofing.
Even if trustees come up with a new plan and legislators go along first thing in January, dividends, or lack of them, for 2003 or 2004 won't be affected. The constitution can't be amended without a yes vote at a general election, so November 2004 is the earliest a change can be made.
Trustee Clark Gruening of Juneau said at Thursday's meeting that he supports the concept of removing the principal limit, as long as inflation-proofing is addressed.
"I think the main interest we have in this is to protect our fund from inflation. It makes sense and we should address it," Gruening said.
The trustees advanced the idea of the endowment and the 5 percent limitation in the days - not so long ago - when the earnings reserve had a huge balance that could be tapped.
"Basically we suggested the 5 percent limit so it didn't become the kitty of first resort," said Gruening, who led a special House committee on the fund when it was in its formative stages. "Without that, it'll be dissipated like the Constitutional Budget Reserve."
Board Chairman Eric Wohlforth concurred, saying that "our main interest is to constitutionally inflation-protect. And an endowment vehicle is the most efficient in that regard."
Some trustees aren't so sure about changing the constitution to make it easier to spend money now protected from payouts to Alaskans or Alaska's government.Janie Leask, the newest member of the board, opposes the idea.
"I just think inflation-proofing has to come first," she said. "I'm just hoping, like everyone else, that the market will recover and we'll be able to pay dividends next year."