http://www.akdemocrats.org/Documents/031504_POMV_Impacts_on_Perm_Fund_Dividend.pdfAdditional information: Gara
JUNEAU – At the request of Representative Les Gara, the Permanent Fund Corporation has provided information assessing the impact on the Permanent Fund Dividend by current proposals to alter management of the Fund. The Corporation's POMV proposal states that 5% of the value of the Permanent Fund may be used for a combination of Dividend payouts and government services. Legislators have argued what portion of that 5% is needed to provide a fair Dividend, and/or one that reflects the Dividend paid under current law. The information and charts provided by the Permanent Fund Corporation’s Chief Operating Officer, Bob Bartholomew, are available here.
The Permanent Fund Corporation has issued a chart and e-mail that answers legislator questions in time for debate this week over varying POMV proposals. This information shows that if you disregard the short-term impact of current market fluctuations, roughly 70% - 72% of the annual 5% POMV payout would have to be paid in Dividends to match future dividends, projected over the longterm, under current law. Based on projected long term average market gains, the current formula would, starting in 2011, provide a Dividend that would be equal roughly 3.5% of an annual 5% POMV payout (or 70% of that 5%). Because of above average stock market conditions in the 1990s dividends during those years were paid in amounts that approximated between 80% - over 100% of an annual 5% POMV payout.
Rep. Gara will provide this information to his legislative colleagues to help with a fair debate over this issue in the coming weeks. Proposals under consideration include Senator Kim Elton’s (D-Juneau) SJR 32, which seeks to mimic the current Dividend Formula by providing a Dividend of 80% of the annual POMV payout, to that stated by Representative Mike Hawker (R-Anchorage), which provides a Dividend of 50% of the POMV payout. Other proposals are also pending.
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The Permanent Fund Corp. provided the following response and (attached) charts to Rep. Gara in response to his questions:
Via E-mail:
March 13, 2004. PFC COO, Bob Bartholomew wrote:
Rep. Gara, My response is based on using the green line on the graph (which I support since the current statutes do not involve a "lag") and reviewing the supporting detailed numbers. Allowin for a slight annual variance the dividend percentage could be from 68 - 70%. I believe the chart and numbers support a 70/30 split looking out 10 - 20 years. If you use the blue line it appears the variance is from 70 - 72%. This still supports the 70/30.
Bob B.
March 10, 2004. "Representative Les Gara" wrote:
THanks Bob. So, 70/30 is where the line flattens out?
March 10, 2004. "Bartholomew, Bob" wrote:
Representative Gara, Attached is a graph and a schedule that provides details of what percentage of the Fund the dividend has been under 3 different scenarios. In two of the scenarios the data looks back 18 years (FY85 data) and forward 11. This shows the current statutory payout over a 29 year period. The graph goes out until 2015 and the future portion is based on median case assumptions, you can see that the trend line has flattened out at the end. I believe if you ran this out 15 more years, using the same median case assumptions that the percentages for 2030 would not change. The schedule has a lot of numbers (to back up the graph) and I would be happy to walk you through these. It does provide year by year what percentage the dividend is of the entire Fund.
Please review these and let's discuss if this answers the 25 year scenario you requested.
Thanks
Bob B