Former Gov. Frank Murkowski speaks on a range of subjects during an interview with the Juneau Empire in May 2019. (Michael Penn / Juneau Empire File)

Former Gov. Frank Murkowski speaks on a range of subjects during an interview with the Juneau Empire in May 2019. (Michael Penn / Juneau Empire File)

Alaska Voices: Permanent fund integrity in peril?

Alaskans need to be kept informed of what the trustees are doing with their money.

By Frank H. Murkowski

The successful conservative management and investment philosophy of the Alaska Permanent Fund must be restored. The importance of the permanent fund’s contribution to the economy of Alaska cannot be overstated. Its current value is more than $83 billion. The earnings from the fund account for about two-thirds of our total state revenue. Without that revenue, we would be close to becoming wards of the federal government, like we were as a territory. Alaskans need to be kept informed of what the trustees are doing with their money.

The public must be given a justification for the abrupt removal of Angela Rodell as executive director of the fund. Under her stewardship it grew almost 50%. Why summarily dismiss a proven and successful manager? Ms. Rodell’s performance in managing the fund has been outstanding. So, it is in the public interest that the Legislature, spearheaded by Sen. Natasha Von Imhof, will take the lead in looking into this unexplained firing and other actions with a hearing scheduled for Jan. 17.

The permanent fund has traditionally been managed by a conservative and safe investment strategy — specifically, a mixture of stocks, bonds, real estate, private equity, hedge funds and the like — while avoiding in-state investments. Until now the fund has refrained from direct Alaskan investments so as to isolate it from the fluctuations of its oil, gas and other resource-based economy and from politics; that appears to be changing. The current trustees have taken it upon themselves to redirect the investment philosophy of the fund and to withhold details regarding this change from the public.

For example, the trustees, led by their chair, have removed $200 million from the fund and placed $100 million each in two firms, McKinley Capital of Anchorage, and Barings, an Outside firm. These businesses should obtain their loans from the Alaska Investment Development and Export Authority (AIDEA) or Alaska banks. This is a significant departure from the conservative investment strategy initiated by the late Elmer Rasmuson, founder and CEO of the National Bank of Alaska and the permanent fund’s first chair.

While $200 million is only a small fraction of the $83 billion in the fund, it signifies a substantial change in strategy. It sets up a glide path for future investments in a totally risky portfolio. Once initiated, it is almost impossible for the trustees to stop asking for authority to increase such borrowings.

Moving $200 million to higher risk development investments means the permanent fund is moving into the investment banking business. Alaska already operates its own development bank, namely AIDEA. Why do we need the state to operate another development bank? Alaskans need an answer to this question.

Historically, AIDEA’s high-risk investment strategy has had many successes, including the Red Dog Mine in Kotzebue, the Vigor Shipyard in Ketchikan, and the Skagway Ore Terminal. It has also had spectacular failures, such as the $79 million loss on the Mustang Project on the North Slope. My administration inherited an AIDEA fish processing plant and cold storage in Anchorage. That loan had to be charged off with the loss of several million dollars; it is now a church. The point again is that there is no need for Alaska to have another state agency move into the banking business. An old banking adage to keep in mind is that all loans are good when you make them.

As mistaken as it is for the Permanent Fund Trust to assume AIDEA’s high-risk investment development lending role, it is equally mistaken for the trustees to keep the $200 million in high-risk investments secret from the public. These are public funds belonging to all Alaskans, and once it is public money it will always be public money, despite any interpretations of state law.

I have had a long history in banking in Alaska. As governor, I had the pleasure of appointing several well-qualified trustees. At the time, I looked for experience in business and finance and a track record of success as qualifications for appointment. I also valued their independence from the many pressures of special interest groups and lobbyists. Several of my appointees have served as chair of the permanent fund. Their expertise in finance and investing prior to their appointments and commitment to a conservative investment strategy helped the permanent fund become what it is today.

In short, the Legislature and the public need to learn why the permanent fund has changed its proven conservative management and investment philosophy. Unless these changes can be explained and justified and limits placed on it, the Legislature should require the fund to return to its successful conservative investment strategy.

We must demand transparency. We must demand answers and we must demand that the best interest of the permanent fund comes before personal interests and political gains.

I look forward to having these questions and others further examined at the Legislative Budget and Audit Committee’s January 17 hearing.

Frank H. Murkowski is a former Alaska senator and governor.

More in Opinion

This image available under the Creative Commons license shows the outline of the state of Alaska filled with the pattern of the state flag.
Opinion: Old models of development are not sustainable for Alaska

Sustainability means investing in keeping Alaska as healthy as possible.

Gov. Mike Dunleavy unveils proposals to offer public school teachers annual retention bonuses and enact policies restricting discussion of sex and gender in education during a news conference in Anchorage. (Screenshot)
Opinion: As a father and a grandfather, I believe the governor’s proposed laws are anti-family

Now, the discrimination sword is pointing to our gay and transgender friends and families.

Kenai Peninsula Education Association President Nathan Erfurth works in his office on Thursday, Oct. 28, 2021, in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Voices of the Peninsula: Now is the time to invest in Kenai Peninsula students

Parents, educators and community members addressed the potential budget cuts with a clear message.

Gov. Mike Dunleavy holds a press conference at the Capitol on Tuesday, April 9, 2019. (Juneau Empire file photo)
Opinion: An accurate portrayal of parental rights isn’t controversial

Affirming and defining parental rights is a matter of respect for the relationship between parent and child

t
Opinion: When the state values bigotry over the lives of queer kids

It has been a long, difficult week for queer and trans Alaskans like me.

Dr. Sarah Spencer. (Photo by Maureen Todd and courtesy of Dr. Sarah Spencer)
Voices of the Peninsula: Let’s bring opioid addiction treatment to the Alaskans who need it most

This incredibly effective and safe medication has the potential to dramatically increase access to treatment

Unsplash / Louis Velazquez
Opinion: Fish, family and freedom… from Big Oil

“Ultimate investment in the status quo” is not what I voted for.

An orphaned moose calf reared by the author is seen in 1970. (Stephen F. Stringham/courtesy photo)
Voices of the Peninsula: Maximizing moose productivity on the Kenai Peninsula

Maximum isn’t necessarily optimum, as cattle ranchers learned long ago.

(Ben Hohenstatt / Juneau Empire File)
Opinion: The time has come to stop Eastman’s willful and wanton damage

God in the Bible makes it clear that we are to care for the vulnerable among us.

Caribou graze on the greening tundra of the Arctic National Wildlife Refuge in northeast Alaska in June, 2001. (Michael Penn / Juneau Empire File)
Opinion: AIDEA’s $20 million-and-growing investment looks like a bad bet

Not producing in ANWR could probably generate a lot of money for Alaska.

A fisher holds a reel on the Kenai River near Soldotna on June 30, 2021. (Photo by Ashlyn O’Hara/Peninsula Clarion)
Voices of the Peninsula: King salmon closures long overdue

Returns have progressively gone downhill since the early run was closed in June 2012

(Clarise Larson / Juneau Empire File)
Opinion: Fixing legislative salaries and per diem

The state Senate was right to unanimously reject giving a 20% pay… Continue reading