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January 7, 2020

January 10th: Fiscal Policy Study Group

Fiscal Policy Study Group

Inflation-proofing, the POMV draw, and the Earnings Reserve:
Understanding the Interconnections

with Professor Ralph Townsend, Director of ISER

BP Energy Center

Building opens at 7:45am

The PowerPoint presentation can be downloaded here.

In 2018, the Legislature passed SB 26 which established a “percent of market value” (POMV) which defines and limits how much will be transferred each year from the Permanent Fund’s Earnings Reserve to the state for the operating budget (including the amount for the Permanent Fund Dividend.) The amount in the Earnings Reserve will fluctuate, so it must be effectively managed in order to reduce the risk that the POMV could not be paid in some future year.

The Alaska Permanent Fund Corporation commissioned analyses to model the probability that the Earnings Reserve would not have sufficient funds to pay the POMV formula in the future. One analysis concluded that the Earnings Reserve should have $12 billion as a minimum to minimize the risk of not being able to pay the POMV.

Ralph’s presentation will explore how inflation proofing the Permanent Fund interacts with the goal of managing the Fund’s Earnings Reserve in order to maintain a sustainable annual draw.

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