Editorial: Tell the whole truth

To help gain support for his proposal to pay Alaskans $5,000 in Permanent Fund dividends this year, Gov. Mike Dunleavy cites numbers that the Alaska Permanent Fund gained $10 billion on its investments March 31 through Nov. 30, 2020. The state can afford the extra spending, he says.

That's not entirely accurate. It's misleading.

Before the fund gained $10 billion in eight months, it lost $7 billion in the first three months of the year.

But the governor is not talking about those money-losing months. It's like telling your partner you won $1,000 at the slots and it's OK to spend the money, without fessing up and admitting you lost $700 at the start of the night.

Permanent Fund earnings change daily. Investment returns have been good in recent months, but there is no guarantee it will continue. Maybe, maybe not. Writing future checks on last month's bank balance is risky.

The governor is correct: Many Alaskans need the additional PFD money. Stores, service businesses, households have all been hit hard by loss of work due to the COVID-19 pandemic. The state's economy is weakened, not just by the health-mandated protocols but by low fish prices, low oil prices, and depressingly low numbers of visitors last year.

As much as Alaskans may need and want the extra-large dividends proposed by the governor, there is a cost to withdrawing a combined $3.2 billion additional from the Permanent Fund this calendar year to cover those payments.

Actually, there are two costs:

The Legislature has limited the annual draws the past few years to 5% of the fund's market value. The economic rule being that over time the fund will earn more than 5% a year and will continue to grow. The governor's plan would take an additional 5% from the fund to pay the extra PFDs. Overdrawing the savings account could mean there would not be enough left to pay for public services and dividends if the fund suffers a miserable year like it did in Fiscal Year 2009, when the account lost $6 billion during the nation's fiscal crisis.

And spending more of the Permanent Fund this year means there will be less in the account to generate earnings for years long into the future. Taking out an extra $3.2 billion for dividends this year would reduce by $200 million the annual 5% draw in Fiscal Year 2030. We would be spending our future.

The truthful and responsible answer is an affordable dividend this year that does not weaken the state's earnings potential for years to come.

- The Wrangell Sentinel


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