Dunleavy keeps making a $2 billion mistake on permanent fund holdings

Once Mike Dunleavy gets a number in his head, it stays there.

That’s the case with his continuing claim that the Alaska Permanent Fund earnings reserve account contains $19 billion.

Some reporters dutifully reported this bogus figure after Dunleavy spoke in Anchorage Thursday. He repeated his intention to ask the Legislature to make 2019 the year of the giant dividend—about $6,700 per person.

How would the giant dividend be paid for?

“The $19 billion in our ERA allows us to pay back the dividends,” he said, arguing that the amounts cut by the governor and Legislature from 2016-2018 to deal with the financial crisis should be handed out to Alaskans in 2019.

He has been saying this for months. During his final debate with former Sen. Mark Begich, he said, “We currently have almost $19 billion in the earnings reserve, we can pay out a full PFD.”

But the earnings reserve no longer contains $19 billion. It contains $17 billion, as the future governor should know. This is not pocket change.

The total is down because money was withdrawn months ago from this account to pay for dividends and some government operations.

The lack of awareness about a critical statistic by someone with years of state government experience is worrisome.

And so are the unexamined implications of the Dunleavy Dividend. Alaska news organizations have a choice to make—they can either keep up the “When are you going to get your check?” coverage or analyze the consequences and check the numbers.

Under his plan, about $6 billion or more would need to be subtracted next year from the earnings reserve account to pay for the Dunleavy Dividend, the regular dividend and state government operations.

Before long we could be down to $11 billion in an account from which the state expects to need a few billion every year to stay in business. There will be years when the Permanent Fund loses money, so this account has to have a big cushion for insurance and the principal can’t be spent.

Duleavy is making back-of-the-envelope decisions about multi-billion-dollar questions. The state can’t afford this approach. We’ll have to see whether Republican legislators will accept this liberal spend-it-while-you-can idea. I think they will have a tough time fighting him on this.

As of Sept. 30, the Alaska Permanent Fund had a balance of $63.9 billion.

This fiscal year the fund has transferred $1.4 billion to the general fund for pay for the 2018 dividend and a slice of government operations during this fiscal year. An additional $1. 3 billion is to be transferred to the general fund over the course of the year for state operations.

One thing we can’t count on is getting lucky with the oil price roulette wheel. That may happen, but no one knows for sure.

A month ago oil was selling for $85, and some optimists saw $100 oil on the horizon. Now it has dropped to near $70 because of politics and markets over which Alaska has zero control.

Over a year’s time, the state would take in about $1 billion more at $85 a barrel than at $70, another reason for a conservative approach to the permanent fund, instead of the Dunleavy Dividend.