HB 411 was introduced to give the Permanent Fund strength, security and stability far into the future. This legislation allows for distributing income from the Permanent Fund as a percent of market value, rather than the current realized return formula.

Arguments in support of distributing Fund income as a percent of market value were first suggested by then PF Trustee Hugh Malone in the late 1980's. The Commission on the Future of the PF advised further study of this concept in 1990. In 1995, the Long-Range Financial Planning Commission recommended the market value approach for a long-term investment strategy. This year, Commonwealth North also recommended this blueprint for strengthening the Fund. This legislation fits in with the PF's long-term investment horizon. While not necessarily endorsing HB 411, The Permanent Fund Board supports a Percent of Market Value approach, recognizing that continuing the present realized return formula could lead to distortions in distributions due to gain taking and asset allocation decisions made as part of good investment policy. Passage of HB 411 would allow the PF to hold investments that historically need more time to mature. Another unique feature of the market value approach is that it produces a distribution program that is inherently more level. This is consistent with accepted methods of measuring PF performance and with the market value accounting requirement now mandated by the Governmental Accounting Standards Board.

First and foremost, House Bill 411 protects the principal of the Permanent Fund. Additionally, this approach maximizes the predictability and stability of annual distributions. This proposal is but one possible element of a long-range fiscal plan. It is however, an essential element if we are to close the troublesome fiscal gap, by most accounts, approximately $800 million short annually.

HB 411 preserves and grows the permanent fund through statutorily required inflation proofing and actually maintains the PF Dividend at the status quo over the next 10 years of projected growth.

After inflation proofing the fund, the total amount of money available for distribution would be calculated. Out of this amount, HB 411 allocates 80% to the dividend and 20% to the General Fund. It produces stability in the fund management and clearly affords a first ever contribution for payment of essential services provided to the people of Alaska, while at the same time holding the dividend harmless.

It may be politically convenient to simply eat the public's savings as we have done since 1992, but that practice could easily lead to a full collapse of Alaska's economy.