Sponsor Statement: House Joint Resolution 47 - Constitutional Amendment: Permanent Fund Appropriations/Inflation-Proofing

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Last Updated:

April 14, 2004

"Proposing amendments to the Constitution of the State of Alaska relating to the principal of the Alaska permanent fund; limiting appropriations from the Alaska permanent fund to amounts equal to that part of the market value of the fund that exceeds the principal based on an averaged percent of the fund market value; and permitting appropriations from the permanent fund only for costs of administering the fund, a program of dividend payments for state residents, and public education."

HJR 47 proposes an amendment to the constitution that would create a modified Percent of Market Value (POMV) endowment approach to managing the permanent fund.

The amendment would limit appropriations from the fund to up to 5% of the total market value of the fund, averaged over a 5-year period. However, if there is not sufficient market value above principal to payout the 5% calculation, the payout would be restricted to the amount equal to that part of the market value of the fund that exceeds principal.

HJR 47 would protect the principal of the permanent fund by defining the dollar amount, down to the penny, as of June 30, 2003.

The principal will grow over time with the 25% mineral lease rentals, royalties, etc. that will continue to be automatically deposited into it. Further, the principal could grow by legislative appropriation.

HJR 47 limits appropriations from the payout to only being used for the following purposes: 1) costs of administering the permanent fund, 2) dividends to state residents, and 3) public education.

This modified POMV approach with a 5% spending limit and protection of the principal assures that over time, only real (net of inflation) income of the fund can be appropriated and that the fund's principal will not be touched.

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