On Monday, credit rating agency Standard & Poor’s said Gov. Bill Walker’s proposed changes to the way the Alaska Permanent Fund is used “is a favorable development because it illustrates … how a pathway to a more sustainable fiscal structure for Alaska’s general fund is possible.”
Last week, Attorney General Craig Richards shared what is being called the “sovereign wealth model” with lawmakers.
The proposal involves diverting all of the state’s oil and gas revenue to the Permanent Fund, whose earnings would be used to partially pay state operations. Permanent Fund Dividends would be paid from a portion of oil and gas revenue rather than the Permanent Fund proper.
The state has estimated that the plan would generate $3.3 billion per year for state operations.
S&P stated that the “sovereign wealth fund model is not risk-free over the longer term” because it assumes a 6.73 rate of return for the Permanent Fund. It also does not solve the state’s entire annual deficit: About $1 billion would be left to be made up through cuts or additional revenue, such as taxes.
In an emailed statement, Walker praised S&P’s “positive feedback.”