Permanent Fund trustees examine far-reaching changes; need for legislative oversight has never been greater

Some of the big ideas under consideration by the Alaska Permanent Fund trustees to better prepare the institution for the future may make sense.

A sampling of the big ideas include: Opening satellite offices in other states or other countries; using more borrowed funds to increase investments; hiring far more staff members to reduce the number of consultants, starting with private equity; getting exemptions from state procurement and open meetings laws; lowering the percent of market value draw; making more personnel records secret; amending state law to deal with several operational problems; amending the Alaska Constitution to change the split between earnings and principal.

The proposed goals demonstrate why we need real legislative oversight of the Alaska Permanent Fund, the most complex entity in state government.

One of the six trustees, Gabrielle Rubenstein, suggested that one way to better compete and retain top investment talent is to allow employees who make deals to invest a portion of their own money alongside public funds.

“If they are allowed to put $10,000 in a deal it goes a long way with retaining the employees because they feel like the deals they just worked in they can put a small amount of their salary in the deal,” she said at a Sept. 6 meeting.

There are all sorts of problems with that idea, both state and federal. There is a difference between a private company and a public enterprise.

At a Sept. 7 meeting, trustee Ethan Schutt said it would be reasonable for the fund to have a goal of getting to $100 billion in three to five years. It’s part of looking at the big picture and communicating that to Alaskans, he said.

“Similarly, we’ve taken a lot of beating in the press lately, in certain corners at least, around this idea of Anchorage office, with some of it is framed as we’re trying to rip this place out of Juneau, which we’re not,” he said.

One of the ideas for future growth is to hire more employees to replace contractors, “which will grow the pie. And so Anchorage office might grow quite a bit, but the Juneau office could grow quite a bit too, if we start to internalize a lot of functions. And by the way would save us a lot of money in external fees. So we get a lot of positive outcome on both pieces.”

At its Sept. 7 meeting, trustees joked about whether they would hold their strategic planning session in October in the temporary Anchorage office, taking down partitions to make sure there is enough room.

Most legislators like to talk about nothing but the dividend, taking their cue from Gov. Mike Dunleavy. Many know as little about the Permanent Fund as they know about oil taxes.

The Legislature should have a committee that focuses on nothing but the Permanent Fund, the biggest source of state revenue. The need to understand has never been greater of what is arguably the largest portion of state government.

The range of changes under review are so far-reaching that Dunleavy needs to be upfront on where he stands on this. He won’t do that. He will say that it is up to the trustees and the Legislature.

None of the ideas under consideration by the trustees for future operations would fix the grave imbalance in a structure that made sense 40 years ago, but no longer. The Dunleavy administration has taught us this much.

Far too much power to control Alaska’s most important financial institution is vested in one individual, the governor.

When the governor chooses trustees from a small circle of supporters, as Dunleavy does, the risk of concentrated power in the handling of tens of billions is far too great to be ignored.

Here is a memo about some of the ideas the trustees are considering for a strategic plan. The trustees hold their annual meeting this week in Anchorage.

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