DETAILS EMERGE: FORMER AG RICHARDS PROPOSING HIGH-RISK ALLOCATION
The Permanent Fund Board of Directors is about to endure an unprecedented attempt by a governor of Alaska to influence the direction of its investments.
The meeting is Friday, Sept. 2 at the Atwood Building in Anchorage, and is available by teleconference.
Sources inside the Administration tell Must Read Alaska that our earlier report is spot on, but there’s more: Governor Bill Walker will request a $1 billion plus Permanent Fund investment into a high-risk, highly concentrated allocation that is centered on an specific industry and a specific geography.
The Permanent Fund has an allocation like this already, but with nowhere near the concentration that is being proposed.
The industry and the geography would be oil and gas companies in Alaska, particularly in Cook Inlet, which are suffering because Gov. Walker vetoed the tax credits that their company business models depended on and that they were owed.
The Permanent Fund buying oil tax credits as an investment to prevent companies operating in alaska from going bankrupt would be an unprecedented risk of Alaskans’ savings account. So far, the governor has been silent on this move, not releasing a press release or a statement about his intentions.
Although Walker was advised even by members of his administration not to veto the payments owed to explorers, he cut $774 million over the past two years. Some companies are now in bankruptcy proceedings, and the downstream effect on other businesses is being felt throughout the Alaska oil patch economy.
The Walker Administration had already made a similar run at the Alaska Retirement Management Board with such a proposal, which was soundly rejected, according to Administration sources.
Two of the commissioners on the retirement board are also on the Permanent Fund Board. They are Commissioner of Administration Sheldon Fischer and Commissioner of Revenue Randall Hoffbeck; it’s likely this proposal is familiar to them already.
Former Attorney General Craig Richards served on the Permanent Fund board until he suddenly — and quite mysteriously — quit as AG in June and had to leave the board. He then received a $50,000 (renewable) contract with the governor, which was retroactive and which avoids the procurement process. He’ll now appear before the board to argue the governor’s proposal.
The Carlyle Group is one of several “private equity and special opportunity” fund managers used by the Permanent Fund Corporation, and it manages 5 percent of the $54 billion fund. The Carlyle Group has designed custom program of private asset investment strategies, that focuses on natural resource investment.
Richards has been in talks with the Carlyle Group as he prepares to make the case to the Permanent Fund directors on how the structure of the proposed fund would work.
A small economic development working group inside the Walker Administration may also have a role. In June, the governor announced two new additions to his staff who are tasked with working on economic development issues.
The two recent hires are the state’s former chief economist, John Tichotsky, who is one of the architects for restructuring the Permanent Fund, and Ed King, who was a commercial analyst for the Alaska Department of Natural Resources.
The group within the Governor’s Office is said to be attempting to create a venture capital market in Alaska, possibly encouraging it by using state assets.
A previous story on this topic is here.