Regularly during my stints guest hosting KBYR AM700‘s The Michael Dukes Show I use the 6:20am segment to cover my “Top 3” news stories of the day — sort of my equivalent of Michael’s “Bullet Point” segments.
While preparing for Friday’s “Top 3” I ran across that day’s editorial from the Fairbanks News Miner. In previous editorials the News Miner had been counting down their Top 10 Interior Issues of the year. Friday’s edition listed the final top 3; understandably, the number 1 issue of the year was “the state budget.”
As they explained why, they said this:
… without such a [fiscal] solution, the Legislature will soon deplete the Alaska Permanent Fund’s earnings reserve, the account out of which annual dividend checks are paid.
That statement effectively repeats something the Governor and others also have claimed over the course of the past year. This is the version the Governor argued in an earlier op-ed piece: “If we do nothing, the [Permanent] fund’s earnings reserve will likely be depleted within four years. Then dividends will be zero.” Dividend Cut Hurts, But Its the Wise Course for Alaska (Sept 23, 2016).
In both instances the statements have been intended to motivate Alaskans to support efforts to adopt “new revenues.” The lead in to the sentence in the News Miner, for example, was this “Without a more fulsome budget solution involving revenue increases for the state, there’s no way the state can balance its books while maintaining a realistic level of services. Just as concerning to many residents, without such a solution, the Legislature will soon deplete the Alaska Permanent Fund’s earnings reserve, the account out of which annual dividend checks are paid.”
The problem with both statements? As we explained in a previous blog piece, they are just “pants on fire wrong.” Bill Walker’s “Pants on Fire” claim about the PFD … (Oct 23, 2o16). The Permanent Fund earnings reserve is not a static number. It is refreshed each year by the annual earnings flowing into it earned off the Permanent Fund.
More importantly, the PFD is not dependent on the level of the earnings reserve. Instead, it is paid out each year also from the annual cash flow earned off the Permanent Fund. The PFD is not in jeopardy unless the Permanent Fund stops generating earnings for an extended period. The Permanent Fund Corporation, however, does not forecast that occurring at any time in the next 10 years (their forecast period). Indeed, as we point out in our previous blog piece:
In all, repeat all — and one more time just in case you missed the point the first two times, repeat all — of the forecast years through FY 2026 (well beyond Walker’s four year claim), the “Statutory Net Income” from the Fund, which is the cash flow from which the PFD is paid, is more than sufficient to cover the full PFD. Indeed, in almost every year the “coverage ratio” — the amount of cash flow available to cover the PFD obligation — is more than 2x (200%). Even in the “worst” forecast year (FY 2018), the coverage ratio is still 1.87x (187%).
After I raised it in the morning segment the issue flowed through the remainder of the day, becoming part of the later discussion with Reps. Tammie Wilson and Lynn Gattis and then finally, becoming the theme of my final segment of the year.
For those interested, here is the portion from the earlier “Top 3” block, and then the final wrap up on the issue in my final segment of the year.
6am (from the “Top 3” block):
8am (my final segment of the year):