{"id":3853,"date":"2018-04-13T23:30:00","date_gmt":"2018-04-14T06:30:00","guid":{"rendered":"http:\/\/spijue.wpengine.com\/news\/house-struggles-could-risk-permanent-fund-corp-in-long-term\/"},"modified":"2018-04-13T23:30:00","modified_gmt":"2018-04-14T06:30:00","slug":"house-struggles-could-risk-permanent-fund-corp-in-long-term","status":"publish","type":"post","link":"https:\/\/www.juneauempire.com\/news\/house-struggles-could-risk-permanent-fund-corp-in-long-term\/","title":{"rendered":"House struggles could risk Permanent Fund Corp. in long term"},"content":{"rendered":"

Correction: A quote about divisions within the House Majority, previously attributed to House Majority Leader Chris Tuck, should have been attributed to Speaker of the House Bryce Edgmon.<\/em><\/p>\n

As the Alaska Legislature careens toward the end of its 2018 regular session, the head of the Alaska Permanent Fund Corporation is urging lawmakers to put brakes on their ability to spend from the fund.<\/p>\n

A divided Alaska House of Representatives may not be able to deliver.<\/p>\n

In a talk with reporters Friday, Speaker of the House Bryce Edgmon, D-Dillingham, said his 21-member caucus is having problems reaching agreement on a plan to draw money from the fund. Rep. Neal Foster, D-Nome and the lead negotiator for the House Majority, concurred with Edgmon\u2019s assessment.<\/p>\n

Since last year, the coalition House Majority has pushed a budget-balancing plan that includes modest cuts, increased oil taxes, a state income tax, and spending from the Permanent Fund. The Senate has rejected changes to oil taxes and an income tax<\/a>, which leaves the House Majority faced with the choice of a budgetary deadlock (and potential government shutdown) or using the Permanent Fund alone.<\/p>\n

\u201cOur caucus, we did not seek \u2014 in terms of filling to the fiscal gap \u2014 to pursue a Permanent Fund-only solution, so we\u2019re still struggling \u2026 and we don\u2019t have a unified position on it,\u201d Edgmon said.<\/p>\n

House Majority Leader Chris Tuck, D-Anchorage, suggested that language in this year\u2019s budget is just as good as long-term rules constraining Permanent Fund spending.<\/p>\n

\u201cAs long as we\u2019re behaving in a structured draw this year, I think that\u2019s the most important thing,\u201d Tuck said.<\/p>\n

\u201cIt is not the same,\u201d said Angela Rodell, director of the Alaska Permanent Fund Corporation, by phone.<\/p>\n

\u201cIt is an ad-hoc draw because there is nothing written in agreement between the House, the Senate and the governor.\u201d<\/p>\n

\u201cIt only constitutes a rule for this budget, for this year,\u201d she said, then asked: What happens when lawmakers return next year?<\/p>\n

Since last year, lawmakers have been debating Senate Bill 26<\/a>, a proposal that includes rules limiting lawmakers\u2019 ability to spend from the Permanent Fund. Right now, lawmakers could spend up to $15 billion from the fund with simple majority votes in the House and Senate. That isn\u2019t expected, but very little prevents it from happening.<\/p>\n

Even SB 26 is an imperfect fix: One legislature cannot bind another with statute, which is why the Legislature can bypass the 90-day session limit imposed by a 2006 ballot initiative.<\/p>\n

Nevertheless, Rodell and some lawmakers believe it represents an important statement of principle.<\/p>\n

Most of the $65 billion Permanent Fund<\/a> is constitutionally protected and requires a vote of the Alaska people to spend, but a significant section of the fund is not protected. The fund\u2019s earnings reserve, which contains money earned by investing the protected portion of the fund, can be spent with a simple majority.<\/p>\n

Sen. Anna MacKinnon, R-Eagle River, is the senator leading negotiations on the Senate side over SB 26. She agrees with Rodell: Budgetary language is not enough.<\/p>\n

\u201cIt is not, because it is ad-hoc from the board\u2019s perspective,\u201d she said. \u201cWhat that does, it affects asset allocation and how much they hold in the earnings reserve account in anticipation of what might happen.\u201d<\/p>\n

As Rodell explained, what\u2019s on the label of the Permanent Fund is what\u2019s inside: Its investments are arranged with an eye toward long-term benefit. Some investments are not expected to become ripe for 10 or 20 years.<\/p>\n

If the Legislature doesn\u2019t have rules, fund managers will be forced to consider what would happen if the Legislature asked for the maximum allowable amount tomorrow. They might have to shift investments out of better-earning long-term investments and into investments with less risk but lower returns, things that could be converted to cash in a short period.<\/p>\n

If the Legislature operates without rules, \u201cthey\u2019re changing the risk profile of the portfolio, but they\u2019re not giving us enough information to build the portfolio,\u201d Rodell said.<\/p>\n

The Permanent Fund\u2019s board of trustees has scheduled a meeting in May to consider whatever action (or lack of action) the Legislature takes. Depending on the Legislature\u2019s moves, the meeting could lead to a change in the way the fund makes its investments.<\/p>\n

While Rodell said a constitutional amendment limiting the Legislature would be preferable from her position, she needs rules.<\/p>\n

\u201cI want them to pass SB 26 and appropriate as SB 26 envisions,\u201d she said.<\/p>\n

The Permanent Fund\u2019s board of trustees agrees: It has passed a resolution urging the Legislature to approve some kind of rules-based approach.<\/p>\n

Late last year, it passed a separate measure urging the Legislature to inflation-proof the fund, but lawmakers appear less interested in that idea. The Senate included no inflation-proofing in its budget, and the House included only one year\u2019s worth. (Lawmakers haven\u2019t inflation-proofed the fund since Fiscal Year 15.)<\/p>\n

\u201cI really want to encourage the Legislature to get to conference committee, to put a rule like SB 26 in place, and they really need to recognize how well the Permanent Fund has done and give back to the principle that which is owed,\u201d Rodell said.<\/p>\n

 <\/p>\n

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 <\/p>\n

\u2022 Contact reporter James Brooks at jbrooks@juneauempire.com or 523-2258.<\/b><\/p>\n

 <\/p>\n

\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Correction: A quote about divisions within the House Majority, previously attributed to House Majority Leader Chris Tuck, should have been attributed to Speaker of the House Bryce Edgmon. As the Alaska Legislature careens toward the end of its 2018 regular session, the head of the Alaska Permanent Fund Corporation is urging lawmakers to put brakes […]<\/p>\n","protected":false},"author":426,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_stopmodifiedupdate":false,"_modified_date":"","wds_primary_category":4,"footnotes":""},"categories":[4],"tags":[34,168,95],"yst_prominent_words":[],"class_list":["post-3853","post","type-post","status-publish","format-standard","hentry","category-news","tag-alaska-legislature","tag-alaska-permanent-fund","tag-alaska-state-budget"],"_links":{"self":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/3853","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/users\/426"}],"replies":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/comments?post=3853"}],"version-history":[{"count":0,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/3853\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media?parent=3853"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/categories?post=3853"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/tags?post=3853"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/yst_prominent_words?post=3853"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}