Musings: Going through significant financial shortfall and budget cuts in our district in the last 5 months has caused me to ask, "With so much money in reserve, why is the State of Alaska so hesitant to support the education of the Alaska School Districts?" I cannot reconcile this question to the games being played-out in the legislative session. It doesn't seen that the Permanent Fund really belongs to the residents of the state, but controlled tightly in the hands of the legislature. It seems like too much power is in the hands of too few.
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| Alaska Permanent Fund $42 Billion Strong |
Essential Question: Alaska Permanent Fund - $41+ Billion. It is our "rainy day account." So, is it "raining" yet? How hard is it raining? Is it time to spend some of the earnings of of the Alaska Permanent Fund to provide for state services? What arguments would you present to the legislators reluctant to confront this issue?
History of Permanent Fund
Fund Balance - for the past 20 years, the fund has been maintaining or increasing.
FY 1997 - $21 Billion
1998 - $23 Bil
1999 - $25 Bil
2000 - $26 Bil
2001 - $24 Bil
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| Growth of Alaska Permanent Fund since beginning. "Alaska Permanent Fund Dividend: An Experiment in Wealth Distribution," by Scott Goldsmith, 2002 |
2003 - $24 Bil
2004 - $25 Bil
2005 - $27 Bil
2006 - $29 Bil
2007 - $31 Bil
2008 - $33 Bil
2009 - $34 Bil
2010 - $36 Bil
2011 - $38 Bil
2012 - $40 Bil
2013 - $42 Bil
Major Historical Data Points
*1968 - first major oil strike. State issued leases to oil companies and took in $900 million. The money was spent quickly on needed state infrastructure and speculative ventures. Alaskan citizens complained about the way the legislature spent the money.
*1976 - Alaska Permanent Fund was created (Article 9, Section 15 of State Constitution)
*1980 First Alaska Permanent Fund Distribution was authorized. However this was not distributed until 1982.
*Per person payouts have varied from smallest of $331 in 1984 to $3,269 in 2008.
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| PFD from $331 to $3,269 over history (google image) |
Payout History
2011 - $1,174.00 per person
2010 - $1,281
2009 - $1,305
2008 - $2,069 + $1,200 Resource Rebate
2007 - $1,654
2006 - $1,106
2005 - $845
2004 - $919
2003 - $1,107
2002 - $1,540
2001 - $1,850
2000 - $1,963
1999 - $1,768
1998 - $1,540
1997 - $1,296
1996 - $1,130
1995 - $990
1994 - $983
1993 - $949
1992 - $915
1991 - $931
1990 - $952
1989 - $873
1988 - $826
1987 - $708
1986 - $556
1985 - $404
1984 - $331
1983 - $386
1982 - $1,000
* The resources of the state on state land belongs to all Alaskan Citizens.
Permanent Fund Basics
1. 25% of Alaskan mineral revenues are added annually
2. Inflation proofing money from fund earnings maintain the fund value
3. Special appropriates can by done by the legislature
How Money is Invested
1. Principal can only be used for investment purposes. The earnings of the fund may be spent by the Legislature.
* Excess money is reinvested, but available for spending
2. Domestic and global stocks
3. Fixed income investment (bonds)
4. Real estate
5. PF management done by executive director/staff and guidance from the 6-member Board of Trustees
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| AK Legislature can expend excess money annually. (google image) |
Arguments to Legislature
"The fund was established as an investment account and public trust, the legislation following the the example of the constitutional amendment, left open the disposition of the Permanent Fund earnings, saying only that the Legislature could appropriate those funds as it saw fit."
1. The Alaskan government distributes only about $1 Billion per year in the dividend. This leave much more funding available for needs on Alaska.
Education - Education is being under funded by the Alaskan Legislature. Anchorage school district alone faces of $20 million shortfall for education. In Juneau the shortfall is about $5 million. This is the same for other larger school districts. The Legislature could fully fund all educational needs from surplus interest gained on the PF. (Anchorage Daily News - adn.com)
The Permanent Fund was patterned after the Texas Public School fund which is an endowment for education in Texas. The AK Legislature should follow the pattern set in Texas. Texas supports public K-12 education in the amount of nearly $1Billion annually.
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| 9% of Alaskan Families live below poverty level. (google image) |
Social Services - Approximately 9% of Alaskan families live below the poverty level. The additional interest from PF could support the needs of these families. (http://www.census.gov/compendia/statab/2012/tables/12s0709.pdf)
Combating Drug and Alcohol Problems in Alaska. - 5.6% of
Alaskans are classified as heavy drinkers. These citizens need medical and psychological help, which could be provided from the Permanent Fund.
(http://www.hss.state.ak.us/dph/healthplanning/movingforward/areas/health.htm)
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| 5-8% of Alaskans may struggle with Alcohol and Drug Problems. (google image) |
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| Nearly 8% of Alaskans are over 65 years old. |
Economic Development - Additional tax credits should be given for the purpose of encouraging business reinvestment in Alaska. Additional oil sources could be discovered and tapped. These investments will yield continued growth of the Permanent fund
Economic Stimulus - each year's PFD stimulates the Alaskan economy with Alaskans spending within the state. This infusion of cash supports the economy Alaska-wide.
Examine Question: Describe the management structure of the Alaska Permanent Fund.
The Alaska Permanent Fund corporation is a Semi-independent Corporation that manages the assets of the PF and other state investments.
Board of Trustees
4 public members
Commissioner of Revenue
One Additional member of the governor's choosing
Additionally there is the APFC Support Staff (accountants, IT specialists, controllers, general counsel)
1 Consultant
3 Advisors (Investment Advisory Board)
(http://www.apfc.org/home/Content/aboutAPFC/board.cfm)
Evaluate:
A wonderful learning experience, knowing more about the Alaska Permanent Fund and how it is handles... or should I say "mishandled?" From a micro-perspective, there is so much money stored for a "rainy day" and so many current needs in Alaska. It seems like the Alaska Permanent Fund Corporation and the Alaska Legislature are very hesitant to make spending decisions -- and mostly out of "fear of not having enough." Perhaps the Alaska Legislature and the Board of Trustees should live WITHOUT for a time to experience much of what the Alaskan Citizenry experiences.
I am starting to enjoy the requirements of this class. Thanks for creating such a challenging class.
Extend:
How might you use the content from this module in your professional practice?
With all the talk of state finances in this module, I was thinking about a unit for high school students with special needs, in which they could relate. I think in our area school bus transportation would be a great connection.
Most of our students ride the bus each day to and from school. I think the students will grasp the fiscal concepts of our state as they look at bus transportation as a service.
I would divide the class into "owners," drivers, maintenance crew and students. Each group will research the need for transportation and relative costs. From each group's perspective, they will create posters showing the importance of transportation.
After the students grasp the concepts of bus transportation as a service and as an industry, connections will be made to the Alaska Permanent Fund. We have the "drivers," the "owners," the "maintainers," and the "users."
Should prove to be an interesting unit of study.
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