The People vs. The Legislature
Part III: The 49 Forward Plan Takes the Permanent Fund Backwards
Alaskans created the Permanent Fund in 1976 to protect citizen wealth from the reach of politicians. Today, the legislature is proposing to change the nature and purpose of our Fund. What Governor Hammond warned against has come true. Alaskans don’t want a constitutional rewrite; we want legislators who place the interests of Alaskans first.
What is the problem?
Modern government appears incapable of adjusting its size and spending to achieve sustainability.
The POMV formula itself is inherently unstable because it budgets based on a percent of total wealth instead of actual “income” earned from that wealth. This puts pressure on our Fund managers to produce returns in every market, every year. But what if we experience a loss, as we have eight times since 2001, even absent inflation?
Prioritizing spending is a legislative prerogative, but also a problem. The legislature appears more intent on expanding public sector “defined benefits” than inflation proofing or funding full dividends—both of which are egalitarian and benefit everyone equally.
What is Senate Joint Resolution 14 (SJR14)
Referred to as the “One Fund” or “The 49 Forward” plan, the resolution outlines the Senate’s plan to collapse the Fund’s two main accounts — the corpus and the Earnings Reserve Account — into one. The resolution also constitutionalizes the “Percent of Market Value” framework (POMV) and caps the annual draw at 5 percent of the Fund’s average market value.
What does the legislature and Fund board claim SJR14 will do?
Fund managers say that the 49 Forward plan will simplify management and eliminate the need for annual inflation-proofing appropriations. But their primary pitch is that SJR14 will make government revenue more predictable, less dependent upon market conditions and oil prices. Fund managers argue that locking a fixed percent draw into the constitution will stabilize our fiscal foundation.
While proponents admit that the ERA is easy to manage in concept, they point to the uncertain timing of transfers and liquidity requirements as added complications.
What does MRAK claim SJR14 will do?
The question is: how does locking in a fixed spending formula that ignores reality (i.e. actual earned income) expose the corpus to erosion of principal if / when called upon to cover deficits derived from deficient income? How does this plan “safeguard” the corpus of the Fund?
In reality, 49 Forward changes the purpose of the Fund. It converts a hands-off savings account to a legislative funding guarantor for a new “endowment” plan. The plan replaces rock-solid protections against a raid on the corpus with squishy, uncertain ones. The plan will weaken our bond rating and eliminate legislative accountability to the people by forcing automatic Fund transfers without a vote. Replacing a “spend what you earn” budget philosophy with “take what you hope to earn even if you don’t earn it”—in perpetuity– is irresponsible.
The main source of fiscal instability is not revenue; it is the legislature’s uncontrolled appetite for spending. The 49 Forward plan trades security of the Fund corpus for easier access to money by the legislature. Consolidating the Fund into one account blurs the line between what money is available for appropriation, and what is off-limits. Unless hard firewalls exist, legislators will plunder the Fund.
The POMV cap of 5% does limit the money grab. However, this is false security because of the real risk that any deficiency will come from the corpus.
Who sponsored this resolution?
The Senate Finance Committee proposed SJR 14 in 2025.
- Co-Chairs: Sen. Bert Stedman; Sen. Lyman Hoffman; Sen. Donny Olson
- Vice Chairs: Sen. Kelly Merrick
- Members: Sen. Mike Cronk; Sen. Jesse Kiehl; Sen. James Kaufman
What is the present situation?
Recent legislatures have all but abandoned inflation proofing; and there is nothing “automatic” about it. Although advocates say the unification plan ensures “automatic inflation proofing,” this is doublespeak for hoping the Fund grows.
Presently, the corpus of the Fund is untouchable. The Earnings Reserve Account (ERA) collects and holds all investment income from which the legislature draws under the Percent of Market Value (POMV) formula. The State now relies on these draws for over half of UGF revenues. The CBR still exists and acts as an emergency fund that requires a ¾ majority to tap.
This structure has served Alaskans well for 25 years. Lawmakers can drain the ERA in a crisis, even tap the CBR, but cannot touch the corpus. Fund managers now separate nonexpendable principal from earnings, thus supporting the firewall. Merge the accounts and this legal firewall vanishes.
Alaska’s anti-dedication clause (Art. IX, §7) applies to all state revenues and acts in tandem with the firewalls to prevent self-executing earmarks. Earnings cannot be automatically dedicated.
What is the legislature’s motive?
The legislature cannot muster the fortitude to reduce spending. They veto initiatives with citizen-wide benefit, such as inflation proofing and a full dividend, yet prioritize “defined benefits” for a select constituency. They prefer to change the Fund from a savings account for future generations to an endowment for government. The concepts of forward funding, of inflation proofing as a constitutionally mandated priority outside the budget, or of retaining higher reserve balances in the CBR, are not favored options because they do not grow budgets automatically.
When market returns are negative or inflation is high, the 49 Forward plan guarantees that the 5% draw is paid, even if it means tapping the corpus. In a strong market, no worries. In down years, future generations pay dearly.
The People’s Fund
The Forward 49 plan reflects a growing divide between the interests of the people and those of our legislature. What happens in Juneau that causes our representatives to crawl into a bucket of worms?
DOGE-like budget discipline is needed but for now, Alaskans should retain our existing three-account structure and inflation proof as the law mandates, even if we have to tap the CBR to do it. Fund managers should seize this moment to act more independently on the people’s behalf—using the constitution as their guide.
Upcoming: Part IV: Ghost Busting: Dispelling the Anti-PFD Phantoms