Senate Finance bill would reduce amount taken from Permanent Fund for state operations

By SUZANNE DOWNING

March 5, 2026 – The powerful Alaska Senate Finance Committee introduced a new proposal Thursday that would gradually reduce how much the state may draw from the Alaska Permanent Fund each year, potentially tightening the amount available to fund government and Permanent Fund dividends in the future.

The measure, Senate Bill 274, is sponsored by the committee itself and led by its co-chairs: Bert Stedman, Lyman Hoffman, and Donny Olson. Kelly Merrick serves as vice chair of the committee.

SB 274 would reduce the state’s current Percent of Market Value (POMV) draw from 5% to 4.5% through a phased schedule beginning later this decade. Under current law, Alaska can draw up to 5% of the fund’s average market value over the first five of the preceding six fiscal years to help fund state government.

The new bill would gradually reduce that allowable draw as follows:

• Fiscal year ending June 30, 2029: 4.9%

• Fiscal year ending June 30, 2030: 4.8%

• Fiscal year ending June 30, 2031: 4.7%

• Fiscal year ending June 30, 2032: 4.6%

• Fiscal year ending June 30, 2033 and thereafter: 4.5%

A second provision of the bill would lock the formula permanently at 4.5%  beginning July 1, 2032.

The legislation also clarifies that the “average market value of the fund” includes the balance of the earnings reserve account but excludes the portion of the principal tied to the historic Amerada Hess settlement.

The proposal comes as lawmakers continue to struggle to balance the state budget. Despite ongoing deficits and debates over taxes, spending cuts, and the size of the Permanent Fund dividend, SB 274 proposes lowering the maximum allowable draw from the fund rather than increasing it.

The Permanent Fund’s POMV draw has become the central mechanism for funding Alaska’s government.

Over $4 billion is transferred annually from the earnings reserve account to the general fund under the formula, supporting state services and helping pay for dividends.

Supporters of a lower draw have long argued that reducing the percentage would better preserve the long-term value of the fund. But reducing the allowable draw could make it even harder for lawmakers to balance the budget without new revenues or deeper spending cuts.

The measure is expected to be taken up first in the Senate Finance Committee, where its sponsors control the state’s budget process and often shape major fiscal policy proposals before they reach the full legislature.