The People of Alaska vs. The Legislature
Part II: Follow the Money
The Alaska Permanent Fund generates enormous wealth and no shortage of political temptation. To understand the stakes, Alaskans must follow the money.
The Permanent Fund is Alaska’s sovereign wealth fund, born from oil and mineral royalties. It has three basic parts: the principal, or corpus; the Earnings Reserve Account (ERA), which holds all investment income; and the Constitutional Budget Reserve Fund.
The Fund and its core principal.
The corpus is constitutionally secure and shielded from legislative appropriation. By law, it must be inflation-proofed and dedicated to income-producing investments. It can only be used or spent by consent of the people through constitutional amendment.
Historically, oil was its primary source of income. Article IX, Section 15 of our constitution requires direct deposit into the corpus of at least twenty-five percent of all mineral (oil) lease rentals, royalties, federal oil and gas revenue sharing and other bonuses. However, excess income from the Fund beyond what is needed to fund the annual budget has also helped grow the corpus. The legislature can transfer funds from its investment account (ERA, see below) to the corpus for inflation protection, but never the other way around.
Tracking and reporting this flow of money is relatively simple. What is hard is keeping track of politicians and their endless deceptions surrounding the budget process.
The Earnings Reserve Account (ERA)—the legislature’s main piggy bank.
The ERA, created by statute (AS 37.13.145(a)), is the Permanent Fund’s flexible spending account. It receives and holds both “realized” (converted to cash) and unrealized earnings and serves three statutory purposes:
- Paying the Permanent Fund Dividend (AS 37.13.145(b))
- Inflation-proofing the principal (AS 37.13.145(c))
- Funding general government operations.
Historically, Alaska’s budget has relied on oil. Today, it depends heavily on investment income from the Fund. Because the ERA is not in the constitution, it exists only by law, meaning legislators can change or eliminate it.
The legislature can appropriate ERA funds for any lawful purpose, provided withdrawals stay within the Percent of Market Value (POMV) cap — a formula designed to limit spending. Within that limit, however, the legislature exercises broad discretion. This is why the ERA is described as the primary revenue source for our state budget.
While the structure offers flexibility, it also invites risk. The legislature can amend or bypass spending limits through ordinary statute. In short, the ERA is spendable, and the only real barriers are political will and public backlash.
The Constitutional Budget Reserve (CBR) — The harder piggy bank
If the ERA is easy money, the CBR is the opposite: cash under lock and key. Created in 1990 by another constitutional amendment (Article IX, Section 17), the CBR was designed to restrain lawmakers during boom years. It set aside surplus revenues from oil tax or royalty settlements to cushion the state against downturns, helping to avoid drastic cuts or sudden tax hikes when prices fell.
Withdrawals from the CBR are deliberately difficult. They require both a fiscal emergency (a revenue shortfall) and a three-quarters vote in each legislative chamber. This high threshold routinely caused budget negotiations to hinge on compromise, usually in the form of trading votes for constituent wish-lists and spending concessions. Ironically, this safeguard encouraged larger budgets rather than smaller ones, but it created bi-partisan accountability.
Framing new controversies by understanding the old ones.
The Governor Bill Walker years of 2014-2018 were tumultuous. While the stock market boom under Trump (2016-2020) caused Fund income to spike, inflation proofing and the traditional PFD program were severely compromised. Alaskans will never forget Governor Walker’s veto in 2016 of a portion of their PFD, ending a 30-year statutory-based precedent, and culminating in the Alaska Supreme Court’s ruling in 2017 that PFD payments would henceforth be subject to legislative appropriation and the governor’s veto power.
During this same period, legislators expanded Medicaid and raided the CBR repeatedly — over $10 billion between 2015 and 2019 — draining it from $16 billion to about $2.9 billion today. Fund managers, charged with preserving liquidity for emergencies, had to invest in low-yield securities that could be sold quickly.
The investment focus shifted in July 2025, when outgoing Revenue Commissioner Adam Crum authorized a $50 million private equity investment in DigitalBridge — the CBR’s first foray into higher-risk securities. Crum argued the CBR had been untouched since 2015 and that higher returns served the public interest.
Critics in the legislature, including Senate President Gary Stevens and House Speaker Bryce Edgmon, condemned the move, calling it a dangerous precedent that undermined the CBR’s purpose as an emergency fund.
Incoming Commissioner Janelle Earls raised procedural concerns, prompting Governor Mike Dunleavy to order a third-party review. Big spenders derided the move as limiting their access to money, about 2% of the CBR, while fiscal hawks praised the move as prudent.
Looking ahead
The certainty that lawmakers would spend every available dime, and then borrow more, prompted the people of Alaska to create the Permanent Fund in 1976. Even after it was formed, legislative insistence that the new Fund would serve as a “rainy day account” persisted for years. The wisdom of those who fought for our Fund is self-evident.
Alaska’s fiscal tug-of-war can be viewed through many prisms: future sustainability; the ethics of taxation; growing the public vs. the private sector; bigger government vs a more limited government. But one thing is clear: The Permanent Fund is—unquestionably—of the people, by the people, and for the people. We own it. The concept of citizen sovereignty, as shareholders deserving of direct distribution, is rare in the world. It falls to the people of Alaska to cherish and protect this legacy.
Check out MRAK’s The Great Debate Part I on inflation-proofing the Permanent Fund. Keep a look out for Part III, coming soon!
Despite the effort by Wally and others to misinform, Alaska residents dd not, do not, and will not have any property interest in the assets of the State. Period.
We have what most would argue is an inadequate UBI (universal basic income) and indeed, most of the whingers claiming a property interest in a PFD rankle at the term, lol, as it portrays them, in their minds, as socialist wankers (not as stock holders rightfully demanding whats theirs – which they emphatically are not.)
PFD recipients are, as Mitt madeso clear, “takers”. It is ironic that the very factuon decrying “takers” are angry that they can’t take more.
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I’m all for disbanding the whole PFD scheme if we can maintain our roads and no taxes. But also, the government needs to stay within its limits of spending. Any spending over a certain amount should be voted upon by Alaskans, not govt who’s been bought by lobbyist. No special handout programs should be created, and public assistance needs to be pulled in and audited. Make people work or move.