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A Day Late and A Bunch of Dollars Short
We spend a lot more time on how to use the Permanent Fund than we do bird-dogging whether it's being managed carefully and responsibly to get the best returns on our investments.
The Alaska Permanent Fund Corporation does that tough job and they've built quite a good reputation. Outside investment managers help out some. Even better, APFC has built a great team of in-house investors over the years. They're Alaskans who do good work at a lower cost—from cash management to bonds to private equity.
We count on APFC leadership to bring maximum returns, make sure we don't take too much risk, and minimize operations cost. The staff does a really good job.
Recently, the Board of Trustees has developed a taste for risk, cost, and secrecy that frankly worries me. A couple of times now, they contemplated raising the risk profile of the fund. They’ve tried to keep information from the public—asking for exemptions from public records and open meetings rules. They’ve considered paying trustees a salary, and they're paying extra overhead on a second office the fund don’t need.
This summer, consultants and the staff talked the trustees out of crazy investment risk. They eventually decided not to ask for salaries. And the legislature does not seem likely to take away transparency rules for Alaskans' money. But what’s the deal with this second office?
The trustees decided they wanted an Anchorage office. It’s a weird call to split up the team. Even weirder, they opened the office outside the budget process without ever asking for funding. They sent staff to talk to a bunch of legislators—including me. Every single one told APFC either not to open a second office at all, or not to do it without getting the money appropriated. Retired legislators testified at their board meeting to say the same thing. They did it anyway.
Last year they presented the office as a fait accompli and asked to continue funding it. The legislature said no. Legislators didn't find benefits to justify the costs. The FY 25 budget gave them $100 to shut it down. The governor vetoed that money, leaving neither shutdown money nor funding for the Anchorage office. The trustees voted to keep it open anyway. It turns out there was enough wiggle room in the budget they could divert funds from other things APFC should be doing to pay for their disapproved pet project.
I chaired a meeting this week for the Department of Revenue budget subcommittee where we took a deep dive into APFC’s budget. We fund them with money from the Fund itself - over and above the sustainable 5% draw. The corporation built enough trust over the decades that the legislature has often allowed a loose structure where APFC can move money as needed and leave whatever’s left at the end of the year in the Fund.
Let's be clear: The staff at APFC are top flight and Alaska is fortunate to have them. But the current crop of trustees squandered the trust their predecessors built. Alaskans are not OK with a board that spends our money without checks or balances—running up the costs and asking for forgiveness instead of permission. The Permanent Fund is crucial to Alaska's fiscal future. I'll work on the budget to make sure it's nobody's petty cash drawer.
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