Dunleavy's failure to fill Permanent Fund board has a silver lining
Gabrielle Rubenstein, whose behavior prompted Alaska Permanent Fund Corporation executives to privately warn about her conflicts of interest, quit the board of trustees July 24, ending the internal examination of her alarming behavior.
There are only six trustee positions for the fund. And one of them has been open since Rubenstein’s departure nearly six months ago because Gov. Mike Dunleavy has failed to name a replacement.
I mention this because in its summation of the highlights of 2024, the fund claims “strong governance” as one of its attributes.
“The Board of Trustees approved updates to its governance, aligning APFC with industry best practices and ensuring that APFC remains at the forefront of investment management and oversight,” the fund said.
At the annual meeting of the trustees in September, Chair Jason Brune went over committee assignments for the five currently serving.
The trustees have two committees, audit and governance.
Three of the five trustees are on both committees. Two of those five—Revenue Commissioner Adam Crum and Transportation Commissioner Ryan Anderson—have full-time jobs in state government.
“I see there’s a representative of the governor’s office here. We will encourage the governor to please appoint the sixth trustee, look forward to welcoming that person to our little club,” Brune said in September.
At that annual meeting, the trustees changed the scope of the audit committee so that it is now called the “Ethics, Audit and Cybersecurity Committee.” That these tasks would be just bolted on to a committee that includes the entire board, minus Craig Richards, is a glaring weakness.
One sign of that weakness is that the “goals” of the committee with the expanded name posted on the APFC website are exactly that same as the goals of the former “Standing Audit Committee.”
Nothing about ethics disclosures and cybersecurity.
If there is one positive element about Dunleavy’s failure to follow the law and “promptly” appoint a trustee, it is a reminder that the current structure in state law for guidance of the fund is out of date.
The structure created more than 45 years ago by legislators—a six-member volunteer board of trustees all appointed by the governor with no legislative confirmation and no public evaluation, vetting or nomination process—is due for an overhaul.
Expansion of the board and creation of a formal selection process with compensation for service as a trustee needs to be part of the picture. The idea that a $400 daily meeting honorarium, plus per diem, is sufficient for what the four public trustees are supposed to accomplish is ridiculous.
The first group of trustees included Chairman Elmer Rasmuson, Vice Chairman Tom Williams, along with Wilson Condon, Peter McDowell, George Rogers and Bob Ward.
At the time the six-member board was created no one was thinking of an $80 billion fund with complex investments all over the world. It began as an investor in bonds, with no money in the stock market, real estate, hedge funds, etc.
Key legislators have told me it would be a waste of time for them to go through the exercise of creating a better system because Dunleavy would veto it.
The likelihood that he would veto an improved system is reason enough for the Legislature to take on the difficult task of studying the matter and calling public attention to the need for change.
The main issues raised by Rubenstein’s behavior are likely to be forgotten or at least downplayed with her departure.
But at the end of August, Dunleavy hired a Washington, D.C. law firm under a no-bid $50,000 contract to provide “a review of the framework of the Permanent Fund corporation and the board composition, expertise, diversity and succession planning to assess and evaluate the strengths, weaknesses, opportunities, and concerns to make informed strategic decisions . . .”
The company was supposed to have finished its work last week. Nothing has been released about its findings. Nat Herz of the Northern Journal reported on this contract.
It will take a great deal more than a cursory Outside legal review to make sure the board overseeing the Permanent Fund is structured and organized in a way that it is up to the task of managing what has become the most important financial institution in Alaska.
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