Gov. Mike Dunleavy continues to peddle his lie, printed last month in nearly every Alaska newspaper, that his plan to spend $6.3 billion from the Permanent Fund in 2021 is financially solid because it would consume “just over half” of the amount the fund grew in 2020.

“I am proposing we utilize just over half of this year's growth to address the 100-year crisis before us,” Dunleavy said in the press release that Alaska newspapers ran without checking the facts.

Dunleavy claimed the fund grew by $11 billion from March to December. In a Facebook video Monday, Dunleavy revised that claim to $10 billion.

“We have an opportunity unlike any other state as a result of that” $10 billion, said Dunleavy.

$10 billion is $1 billion closer to the truth than $11 billion, but it is billions off the mark, the latest episode of the Dunleavy fiscal fantasy tour.

What Dunleavy did not say is that the Permanent Fund had some of the worst days in its history in early March, temporarily shedding nearly $9 billion in market value between March 4 and March 18 during the worldwide pandemic panic.

The sudden slide was temporary, followed by a quick recovery, but don’t be fooled into thinking of the bounce-back from the bottom as “growth.”

It would be like coming back from Las Vegas and bragging about winning $10,000 and claiming it’s a real number you can count on, without subtracting the $9,000 you lost along the way.

Dunleavy needs to stop repeating his multi-billion-dollar lie and tell Alaskans the truth about what happened in early March and the rest of the year.

The truth is the Permanent Fund grew by about $3 billion in 2020. The $10 billion “opportunity” is bogus.

Brad Keithley, who has a better grasp of this than I do, goes into the numbers and the 2020 results.

Dunleavy says on this video that his plan to spend $3 billion in 2021 on dividends represents “just a few months of profits from this year’s permanent fund earnings.”

That’s not true.

Dunleavy’s $6.3 billion plan, with about half of that for dividends, would consume about twice the 2020 growth of the Permanent Fund.

Now everyone should understand that short-term results like this are not an intelligent way to judge how much can be withdrawn from the fund each year.

But a clear understanding of the facts should put an end to the governor’s argument that the fund is growing so quickly—if you ignore the first three weeks of March—that it’s no big deal to make a super-sized withdrawal to pay for government and $5,000 dividends.

Most legislators won’t be fooled by the nonexistent $11 billion or $10 billion gain.

The $6.3 billion withdrawal plan would reduce the long-term earning power of the fund and expand future deficits by about $160 million a year. A sustainable withdrawal would be about $3 billion.

“Legislature must weigh desire for stimulus against long-term cost,” Alexei Painter, legislative fiscal analyst, says in one of the slides to be presented to the House Finance Committee Friday at 1 p.m. at a budget overview.

If the Legislature agrees to take added billions from the Permanent Fund earnings reserve without making plans for new revenue or enormous reductions in state and local services, the earnings reserve could be gone within a few years. Or sooner. It would be sooner if investments decline and the next big drop lasts for months or years instead of weeks.

The governor’s budget plan suggests that $1.2 billion in new revenue will be generated starting in the fiscal year that begins July 1, 2022. He hasn’t identified what form that might take—income tax, oil tax, sales tax, or bags of money left by accident on the steps of the Capitol.

A sales tax is the most likely option, but there is no consensus and it’s not clear that the governor is serious about a tax in 2022.

To have enough time to set up any new tax plan, the Legislature should act on it in 2021.

That would create immediate political pressure on Dunleavy and the Legislature. The governor says that now is not the time to raise taxes, so it’s hard to envision him fighting in 2021 on a tax that begins in 2022. It is a political risk that he should take, however, as a tax is needed.

We will soon know if Dunleavy is serious about the $1.2 billion in new revenue for 2022.

Or if this is magical thinking placed in a report most people don’t read, just to pretend that there won’t be a giant deficit a year-and-a-half from now or a Dunleavy proposal to push the earnings reserve closer to zero.

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