By ANGELA RODELL
As Alaska continues to grapple with fiscal uncertainty, the Alaska Permanent Fund remains at the heart of the conversation. Its performance and structure profoundly affect our state’s budget, the future of the Permanent Fund Dividend (PFD), and the long-term economic health of Alaska. Yet its structure – specifically the division between the Earnings Reserve Account (ERA) and the principal – is no longer serving us well.
In fact, it’s creating a slow bleed of our spendable savings. Proposals to merge the two accounts into a single constitutionally protected fund are not just about simplifying accounting. They are about correcting a dangerous flaw in how we draw money from the Fund and effectively creating a spending limit on the Fund.
To understand why, we need to briefly unpack how the Fund works today.
The Fund is divided into two accounts: the principal, which is constitutionally protected and cannot be spent without a vote of the people, and the Earnings Reserve Account (ERA), which holds realized investment earnings and is fully spendable with a simple majority vote of the Legislature.
Since 2018, Alaska has followed a Percent of Market Value (POMV) draw system to sustainably use Fund earnings. The formula allows for a 5% annual draw based the average total market value of the entire fund – both the principal and the ERA. However, there’s a fundamental problem: while the POMV is calculated using the full value of the Fund, themoney can only be taken from the ERA. The Legislature is legally prohibited from touching the principal, which means the full value of the Fund is theoretical when it comes to actual cash available.
This creates an imbalance that threatens the very sustainability the POMV system was designed to protect. Here’s why: realized gains from investments (like selling a stock at profit) flow into the ERA, where they become available to spend. But unrealized gains – paper increases in asset values – primarily remain in the principal. The problem is that most of the Fund’s growth has been in unrealized gains, which are locked away. Meanwhile, the Legislature continues to draw 5% of the average total fund value every year – but only from the ERA.
This means the ERA is being drawn down faster than in can be replenished. In years of market volatility or lower realized returns, this pressure becomes even more acute. And because the ERA is fully spendable with a simple majority vote, it’s vulnerable to political pressure. The temptation to overdraw is always there.
Merging the ERA with the principal into a single, constitutionally protected fund fixes this flaw. It doesn’t just simplify fund management; it changes how the Fund can be accessed. All earnings – realized and unrealized – would remain in the unified fund. The only way money could be withdrawn would be through a constitutional POMV draw.
This is not a minor shift. It would be the most significant fiscal reform in Alaska in a generation. It creates a hard cap on spending from the Fund, one tied directly to its performance and sustainability. No more treating realized gains as a checking account. Instead, the entire fund is protected, and spending from it is limited to what is sustainable over the long term.
In the end, this reform is about protecting the Fund, the PFD, and Alaska’s fiscal future. The Fund was created to turn a temporary resource boom into a permanent financial legacy. But that legacy only survives if we guard it against political pressure and short-term thinking.
This is more than a fiscal policy debate. It’s about protecting the Fund for future generations, ensuring the PFD survives, and building a system that supports long-term stability. Merging the accounts creates the discipline Alaska needs – and the legacy Alaskans deserve.
Angela Rodell of Juneau is a former executive director of the Alaska Permanent Fund.
And… When pigs fly… Ohhh yeah they did fly to Juneau already..
Go huff and puff on someone else’s house Angela…
Wasn’t she “fired” from PFD. Also didn’t she “collide” with BW to change the formula.I Wouldn’t trust her ..Now, I could be wrong…
I don’t think you’re wrong kc… If you merge accounts, you get 5% annual draw of the ENTIRE fund – if the market does not perform at greater than 5%, no inflation proofing and Fund loses value because they SPEND it. Note also Rodell does not describe how PFD would be calculated or even if a dividend would be paid…
You’re fired Angela – it’s what you don’t say that’s so dangerous – like Geissel and the POMV plan…
Kc, your phrase, “I could be wrong,” is something you should carefully consider. For discussion, let’s assume Angela was fired. Why do you imply that reflects poorly on her rather than the board? You merely need to read current news to see most government entities are infected with corruption and incompetence. Why would you think the PF Board is any different? The fact is, she would not compromise her principals to accomodate foolish policy. Do your research.
The major flaw is Alaska Legislators, Our PFD will NOT fix their greed and stupidity
The Fund will never be secure with Conservatives angling for a guaranteed basic income. Better to let the earnings reserve drain and force the State to address a long term fiscal plan
Back stabber!!
Oh “frank”….
You really don’t understand the concept of contractual obligations, or do you just ignore them as inconvenient?
“Better to let the earnings reserve drain and force the State to address a long term fiscal plan”
Right on Frank! It is time the legislature/state start living within its means!
“Since 2018, Alaska has followed a Percent of Market Value (POMV) draw system to sustainably use Fund earnings.” What did we do before 2018?
“Merging the ERA with the principal into a single, constitutionally protected fund fixes this flaw. It doesn’t just simplify fund management; it changes how the Fund can be accessed. All earnings – realized and unrealized – would remain in the unified fund. The only way money could be withdrawn would be through a constitutional POMV draw.” How is this defined in the Alaska Constitution? Because clearly, Alaska doesn’t follow Alaska statutes.
Opening the pf principal account to a 5% annual take will open Juneau’s pocketbook to unlimited future spending.
By that I mean budgets set today to fund projects 20 years down the road will be initiated.
You can bet long range labor contracts will be set in stone.
How about: shrinking this runaway government and stop spending more than we have.
Wait, what am I saying? Be responsible with our money? In Alaska?
Bud, neither party is going to do that. Their Reelection is at stake.
Theirs 19 in house (of the republicans) and some democraps that are trying to be responsible in the senate their are 9 that r being responsible. But the main 9 that have been their for 25 plus yrs are the ones who keep increasing the states fiscal budget exponentially in past 10 yrs cause they kept seeing $$$$$$$$ and more on the pfd side
Plus they want to install an income tax.
We’re not stupid. We know you want to “merge” the funds so that you can get your grubby hands on the corpus. So that you can take it all for government. Stop stealing from Alaskans.
Transforming PF by combining the corpus and ERA and converting what is a peculiar trust fund into an endowment might make sense if the draw (the “POMV”), is pegged at or right around 4%.
Anything over a draw of 4% from a combined ERA and corpus will lead to trouble. A percentage draw over 4% will not grow the fund long term and might require greater draw from fund than is consistent with rate of return on investment, at least on short term or medium term basis.
And this assumes draw is on fund after inflation proofing.
So, moving to combined POMV model might make sense if the draw is at or close to 4%.
Good column. Thanks.
Maybe closer 3.5%
Joe, what the legislature enacts can be changed by the legislature – this would be the proverbial camel’s nose in the tent.
It’s gotta be a resolution that sends measure to voters to amend Alaska Constitution.
That’s only acceptable way to change the structure. A statutory change could be ignored and would be I’ll advised.
Oh please, how stupid do you think we are??
Mrs. Rodell claims that the POMV is constitutional, yet if memory serves this was not voted on by the people of Alaska, just the legislature.
This is another attempt at an end-run around the voters and owners of the Permanent Fund. It is the culmination of years sending money BACK to the corpus instead of the ERA by Giessel and company, draining the ERA artificially to make a case for taxes or this particular scenario.
Once those two funds are combined the legislature will have unfettered access to the entire fund and we can kiss our PFD good-bye (as well as the fund after a few years) then it’s taxes for all.
So here is my proposal:
If Mrs. Rodell, Cathy Giessel et al want to get their mitts on the corpus, then split it 50/50 and give each resident a payout. After that they can keep their share and all future royalties and taxes for state business. The agreement needs to also entail a provision prohibiting state income taxes and return of some subsurface rights.
Before you all get up in arms about the future and the next generation, the way it is going it will be gone in about 10 years anyway, as the POMV takes too much out each year to sustain growth.
i used to walk to work with Gov. Hammond, the “father” of the div. fund. He told me that Alaskans must be aware of the constant effort of the Legislators to try and get their grubby little hands on the peoples dividend.
This is .essentially, BS. Any politician gets a chance to screw with that fund and they will put a back door into it and that will be the end of it. The reality is the politicians are incapable of properly stewarding the state’s financial matters in a way that has any basis in fiscal responsibility. I watch the personal wealth of these Juneau idiots grow as the state continues down the road of financial unsustainability and am pissed that there seems to be no mechanism to halt the idiocy.
Med check time for Rubey Bob.
The legislature colluded with Walker to steal the PFD from the people and you think they won’t steal the fund itself? That is a deluded thought process. Nothing I stated is without factual basis.
This is a horrible idea. There will never be accountability for government spending if the constraints on spending from the Permanent Fund principal are removed.
Honestly, people would be more engaged and less likely to support politicians advocating for continued stupid spending on poor outcomes if they had to pay income taxes. The POMV scheme Rodell, Walker, Kendall, and others cooked up to steal dividend income from Alaskans and divert it to fund unsustainable government spending should be abolished. Alaska currently spends way more on government than it’s people can afford, because the money overwhelmingly comes from a magic “permanent fund” pot and oil and gas industry taxes. Ms. Rodell’s proposal would just make things worse.