Brennan: Readers catch column error
By Tom Brennan |
Several sharp-eyed readers and a few cranks picked up on an error in last week’s column. In it I mentioned that when I went to work for The Voice of The Times in 2000, the state was running a deficit, “which was paid for by drawing down money socked away for that purpose by the Alaska Permanent Fund board of directors.”
Actually the money used to cover deficits in those years came from the Constitutional Budget Reserve and was not Permanent Fund money. The CBR was established as a savings account when big bucks were flooding in from oil dispute settlements and high oil prices, a wise way of socking money away for future needs.
And, as often happens, the future eventually arrived and draws from the CBR have brought that fund down to about $2 billion. So our state leaders last year began drawing money from the Earnings Reserve account of the Permanent Fund. Money in that account is available for state spending, but in past years legislators steered away from tapping it and the money was used only to pay our individual dividends. Crossing that threshold is what made many people nervous.
The Earnings Reserve Account is doing quite well and recently has been up to about $17 billion thanks in large part to a deposit from the Permanent Fund’s principal accounts of $4.4 billion, which more than offset a draw by the Legislature of $2.7 billion to cover state spending and solve last year’s deficit problem. I have been trying to find out how much the fund might deposit into earnings in the next fiscal year, but it’s unclear whether that amount has been determined yet. It’s a little early in the current fiscal year, which doesn’t end until next June 30, so perhaps that hasn’t been decided yet. The fund has been doing well overall; its board has generally made good investments over the years and its balance has grown accordingly.
If the next deposit to the Earnings Reserve is anything like the last one, our state leaders will have a nice balance to deal with. That is the account from which dividends are paid, and until last year it had never been used for anything except dividends. If the fiscal 2021 deposit to that account by the Permanent Fund is comparable to this year’s, state leaders could presumably draw about $4 billion without reducing the balance from its present level.
It will be extremely important for public morale that the state pay a full dividend this year and Gov. Mike Dunleavy is proposing to do just that and to pay Alaskans back for the amount they were short-changed by Gov. Bill Walker and the Legislature over the last three years. Dunleavy announced last week that this year’s dividend check will be around $4,000 and the same amount in fiscal 2020 and 2021. That’s not the $6,000 many people hoped for if the shorted amount were paid all at once, but it will seem a nice check for those who are more patient.
Don’t be surprised if the Legislature decides to tap the Earnings Reserve to balance the next budget, but after last year’s angry response from thousands of voters they are unlikely to make a very large draw. And with Mike Dunleavy in the governor’s office we can expect to see some substantial downsizing of state government. That looks to be one of his priorities and, if he is successful, that could make a big difference in the size of the state budget and in any deficit that remains.
My thanks to all who caught last week’s error, both the sharp-eyed readers and the cranky old guys like me.