Alaska Permanent Fund Corporation issues warning to Alaska lawmakers

The Alaska Permanent Fund Corporation’s board of trustees issued advice and a warning to the Alaska Legislature on Thursday, marking only the sixth time in the 42-year history of the $66 billion corporation that it has taken such a step.

The board unanimously approved a resolution that says trustees believe the state’s multibillion-dollar deficit and dwindling reserves require spending from the Alaska Permanent Fund. The resolution goes on to state that if the Legislature authorizes such spending, it should do so under an organized system, rather than on an as-needed basis.

“A rules-based system improves the likelihood that the Permanent Fund will be sustainable over time,” the resolution states.

The board of trustees lacks the power to force the Legislature to implement such a system, but the resolution is a significant statement from the apolitical board.

“I think it’s only half a dozen times in the history (of the corporation) that we’ve done this,” Executive Director Angela Rodell said.

Prior boards issued resolutions directed at the Legislature in 2000, 2003, 2004 and 2009.

The current board issued a Legislature-focused resolution last year as well.

Rodell has previously warned lawmakers that if they take money from the fund without first implementing a system of rules, fund managers will be forced to change their investment strategy, something that would reduce returns and the future value of the fund.

“It is important for Alaskans to understand, and I think it is important to point out in as kind and reasonable a fashion as possible,” board member Marty Rutherford said.

Last year, the fund returned 12.89 percent; over the past five years, it has averaged 8.89 percent returns.

The final text of the resolution was a “kindler, gentler” version than a draft version that first came up for a vote, board chairman Bill Moran said shortly before Thursday’s vote.

That first version criticized the Legislature for failing to approve $1.4 billion in inflation-proofing fund transfers since 2016. A section of the resolution said that failure was an example of the Legislature failing to abide by a rules-based system.

The fund consists of several parts, but its two biggest components are the constitutionally protected principal account, and the earnings reserve, which contains the investment earnings of the fund, and which can be spent by the Legislature by a simple majority vote.

Each year, the Legislature is supposed to authorize a transfer from the earnings reserve to the principal to account for inflation. That didn’t happen in 2016, and it didn’t happen in 2017. The 2018 transfer is under discussion in the Legislature, and the board in September approved a resolution directing Rodell to pursue support for it.

Board member Andy Mack, also commissioner of the Alaska Department of Natural Resources, said pointing out the Legislature’s past actions was “not helpful.”

Mack was supported by fellow board member Carl Brady, who said, “the problem I have with the resolution, although it’s been modified, is pointing fingers.”

“We should do a resolution that simply says what we want as opposed to any dialogue of what happened in the past and how we got there,” he said.

Rutherford opposed the deletion, saying that one of the key duties of the board of trustees is to support the fund’s sustainability, and the Legislature’s failure to inflation-proof the fund has acted against that concept.

“I know everybody gets nervous about irritating someone out there in the Legislature … but I think we need to think very strongly about our responsibilities to the fund and future generations,” she said.

The board of trustees ultimately decided to break for 10 minutes to allow corporation staff to rewrite the resolution. After the break, they unanimously approved the revised copy.

The resolution comes at a critical moment for the Legislature, which is considering how best to resolve a multibillion-dollar annual budget deficit. With the state’s Constitutional Budget Reserve nearly exhausted, lawmakers are expected to turn to the Permanent Fund to partially balance the deficit.

How much will be spent from the fund is a key question for lawmakers, who will enter the second half of the constitutionally authorized 121-day regular session next week.


• Contact reporter James Brooks at jbrooks@juneauempire.com or call 523-2258.


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