Legislature(2025 - 2026)SENATE FINANCE 532
03/04/2025 09:00 AM House LEGISLATIVE BUDGET & AUDIT
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): the Impact of the Pomv on Alaska's Budget | |
| Presentation(s): Alaska Permanent Fund Corporation's Trustees' Paper 10 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
LEGISLATIVE BUDGET AND AUDIT COMMITTEE
March 4, 2025
9:01 a.m.
MEMBERS PRESENT
Senator Elvi Gray-Jackson, Chair
Representative Zack Fields, Vice Chair
Senator Bert Stedman
Senator Cathy Giessel
Senator Lyman Hoffman
Senator Bill Wielechowski
Representative Neal Foster
Representative Andy Josephson
Representative Chuck Kopp
Representative Cathy Tilton
Senator Scott Kawasaki (alternate)
Representative Bryce Edgmon (alternate)
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Kelly Merrick
Senator Gary Stevens
Senator Mike Cronk
COMMITTEE CALENDAR
PRESENTATION(S): THE IMPACT OF THE POMV ON ALASKA'S BUDGET
- HEARD
PRESENTATION(S): ALASKA PERMANENT FUND CORPORATION'S TRUSTEES'
PAPER #10
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
ALEXEI PAINTER, Director
Legislative Finance Division
Legislative Agencies and Offices
Juneau, Alaska
POSITION STATEMENT: Gave the Impact of the POMV on Alaska's
Budget presentation.
JASON BRUNE, Chair
Board of Trustees
Alaska Permanent Fund Corporation
Anchorage, Alaska
POSITION STATEMENT: Co-offered the Alaska Permanent Fund
Corporation's Trustees Paper #10 presentation.
DEVEN MITCHELL, Executive Director
Alaska Permanent Fund Corporation
Anchorage, Alaska
POSITION STATEMENT: Co-offered the Alaska Permanent Fund
Corporation's Trustees Paper #10 presentation.
ACTION NARRATIVE
9:01:24 AM
CHAIR ELVI GRAY-JACKSON called the Legislative Budget and Audit
Committee meeting to order at 9:01 a.m. Representatives Foster,
Josephson, Kopp, Tilton, Edgmon (alternate), and Fields and
Senators Stedman, Wielechowski, Hoffman, Giessel, Kawasaki
(alternate), and Gray-Jackson were present at the call to order.
Also present were Senators Merrick, Stevens, and Cronk.
^PRESENTATION(S): The Impact of the POMV on Alaska's Budget
PRESENTATION(S): The Impact of the POMV on Alaska's Budget
9:02:11 AM
CHAIR GRAY-JACKSON announced that the first order of business
would be a presentation on the Alaska Permanent Fund.
9:03:05 AM
ALEXEI PAINTER, Director, Legislative Finance Division (LFD),
Legislative Agencies and Offices, directed attention to a
PowerPoint presentation, titled "POMV in Alaska's Budget" [hard
copy included in the committee packet], that began with a bar
chart on slide 2, "UGF Revenue and Budgets, FY 14-25," showing
how the percent of market value (POMV) draw has influenced the
state budget. The adoption of the POMV draw in Fiscal Year 2019
(FY 19) significantly changed the budget picture by reducing the
average pre-transfer deficit from $3 billion to $250 million,
which has been filled using federal funding from the COVID-19
Pandemic and the remainder of the Statutory Budget Reserve
(SBR). Major draws from the Constitutional Budget Reserve (CBR)
have largely been avoided, as the legislature works to rebuild
that balance. He stated that adding the POMV draw helped
stabilize state revenue despite the existing structural deficit.
9:05:04 AM
MR. PAINTER paraphrased slide 3, "Earnings Reserve Account (ERA)
Sufficiency," which read as follows [original punctuation
provided]:
• APFC's Statutory Net Income projection for FY25+ is
6.25%, compared to inflation of 2.50% and a 5.00% POMV
draw. This leads to a projected decline in the balance
of the ERA balance.
• APFC's projections show that the year-end ERA
balance will drop below the following year's POMV draw
amount in FY32, assuming statutory inflation proofing
each year. That means that when the year begins, the
ERA won't have enough money to pay out the entire POMV
draw for the year and will have to rely on current-
year earnings.
• LFD's probabilistic modeling shows an 46% chance of
having an insufficient ERA balance to make the full
POMV draw over FY26 FY35, assuming full inflation
proofing and statutory POMV draws. If inflation-
proofing is suspended when the ERA balance drops below
the following year's POMV draw, that drops to 33%.
9:08:34 AM
MR. PAINTER paraphrased slide 4, "Policy Levers to Reduce ERA
Sufficiency Risk," which read as follows [original punctuation
provided]:
• Failure rate reflects the percentage of simulations
where the ERA balance is insufficient to pay the full
POMV draw at least once during the ten-year period
• "Statutory Inflation Proofing" refers to full
statutory inflation proofing occurring annually.
"Partial Inflation Proofing" means that full statutory
inflation proofing occurs, except the amount is
reduced if the FY-end ERA balance is insufficient to
pay the following years POMV. "No Inflation Proofing"
means that there is zero inflation proofing in any
year from FY26-FY35.
MR. PAINTER described the chart on slide 4, which showed ERA
failure rates with different levels of inflation proofing and
POMV draw percentages. He noted that even with no inflation
proofing, the probabilistic modeling shows that the ERA may
still be insufficient to fully fund the POMV draw. The far-
right column reflected the impact of changing the draw rate on
the FY 26 deficit. He explained that decreasing the POMV draw
to 4 percent would increase the deficit by $759.7 million,
thereby solving one problem and creating another.
^PRESENTATION(S): Alaska Permanent Fund Corporation's Trustees'
Paper #10
PRESENTATION(S): Alaska Permanent Fund Corporation's Trustees'
Paper #10
9:10:30 AM
CHAIR GRAY-JACKSON announced that the final order of business
would be the Alaska Permanent Fund Corporation's Trustees' Paper
#10 presentation.
9:10:50 AM
JASON BRUNE, Chair, Alaska Permanent Fund Corporation (APFC),
co-presented a PowerPoint, titled "Trustees' Paper Volume 10
Modernizing the Alaska Permanent Fund: A Single-Fund Endowment
Model" [hard copy included in the committee packet]. In
reflecting on Mr. Painter's statement that there's a 46 percent
chance that the ERA balance would be insufficient to make a full
POMV draw, he said combining the Alaska Permanent Fund's
accounts, as proposed in the trustees' paper volume 10, titled
"A Rules-Based Permanent-Endowment Model for Alaska" [included
in the committee packet], would bring predictability.
9:12:16 AM
DEVEN MITCHELL, Executive Director, Alaska Permanent Fund
Corporation (APFC), directed attention to a PowerPoint, titled
"Trustees' Paper Volume 10 Modernizing the Alaska Permanent
Fund: A Single-Fund Endowment Model." He began on slide 2, "A
Legacy of Intergenerational Resource Contribution," which read
as follows [original punctuation provided]:
In 1976
Alaskans chose to permanently forgo immediate use of
at least 25% of oil and mineral revenues, saving
instead to create a renewable financial resource for
generations the Alaska Permanent Fund.
Today, the Fund -
• Leads the Nation
The largest U.S. sovereign wealth fund, globally
recognized as a model for converting finite
natural resources into lasting wealth.
• Supports Alaska
Provides over 50% of the state's unrestricted
general fund revenue for dividends and essential
services through the annual Percent of Market
Value (POMV) draw.
9:13:39 AM
MR. MITCHELL paraphrased slide 3, "To Benefit All
Generations...," which read as follows [original punctuation
provided]:
• the fund should provide a means of conserving a
portion of the state's revenue from mineral
resources to benefit all generations of Alaskans;
• the fund's goal should be to maintain safety of
principal while maximizing total return;
• the fund should be used as a savings device
managed to allow the maximum use of disposable
income from the fund for purposes designated by
law.
MR. MITCHELL added that the fund is invested for total return,
which doesn't always align with statutory net income (SNI) and
has resulted in some of the stresses pointed out by Mr. Painter.
9:15:11 AM
MR. MITCHELL moved to slide 4, which illustrated the fund's
current two-account structure. The Principal provides permanent
savings to be used only for income-producing investments, with
realized earnings deposited into the ERA for appropriation by
the legislature. Realized earnings, which are rents, stock
dividends, interest payments on fixed income securities, and
sales from assets that have increased in value, are the
spendable portion. Unrealized earnings do not flow to the ERA
and are not spendable under the current construct; however, they
are allocated on a pro rata basis between the Principal and ERA.
Inflation proofing is the intergenerational component and a
lever that's controlled by the legislature when the ERA is under
stress. Any amount can be drawn from the ERA with a simple
majority of the legislature and the governor's concurrence.
9:17:26 AM
MR. MITCHELL turned to slide 5, which illustrated the proposed
single-fun endowment construct. In this model, contributions
would enter the Alaska Permanent Fund with one payout, thereby
eliminating the ability for one generation to overuse the fund
and the mismatch between total return and SNI.
9:18:31 AM
SENATOR STEDMAN recalled prior testimony from a sovereign wealth
advisor who named the Alaska Permanent Fund as one of the
largest sovereign wealth funds in the world relative to the
state's budget and its population. He commented on the vastness
of the wealth that Alaska's forefathers created.
MR. MITCHELL acknowledged that there are larger international
sovereign wealth funds that exist; however, they're smaller than
the Alaska Permanent Fund on a per capita basis.
9:19:47 AM
MR. MITCHELL paraphrased slide 7, "Global Investment - maximize
a risk-adjusted return," which read as follows [original
punctuation provided]:
Through prudent asset allocation and strategic
decision-making, APFC has robust performance across
asset classes, reinforcing our commitment to deliver
sustainable value for our stakeholdersthe people of
Alaska.
1980
Investments: Bonds Fixed Income
Payout method: Based on realized income
Today
Investments: Diversified - Public & Private Markets
Payout method: Based on % of the Fund's total value
9:22:12 AM
MR. MITCHELL, paraphrased slide 8, "Investing for the Longe
Term," which read as follows [original punctuation provided]:
Real Return
Annual investment performance adjusted for inflation
indicates sustained value and purchasing power.
The Board's objective for the Fund:
• Investment Performance
Ability to generate an annualized return of
inflation (CPI) + 5% over a 10-year period.
• Investment Risk
Ability of the Fund to achieve the long-term
target while conforming to the Board's approved
risk appetite metric.
MR. MITCHELL referenced the bar chart on slide 8 that showed
total return, real return, and return objective, which is
Consumer Price Index (CPI) plus 5 percent. Mr. Mitchell stated
that 5 percent is a difficult target to hit on an ongoing basis.
9:23:06 AM
SENATOR STEDMAN asked whether the 5 percent draw rate pushes the
asset allocation more aggressively than a 4.25 or 4.5 percent
draw would.
MR. MITCHELL said Callan's Capital Market Assumptions (CMA)
diminished expectations for equity markets over the next 10
years. With the updated capital market assumptions, the fund is
slightly below CPI plus 5 percent at 4.8 percent, so risk must
be added to the portfolio's asset allocation to increase the
probability of achieving 5 percent.
9:24:14 AM
MR. BRUNE added that the 5 percent draw has not impacted the
Board of Trustees' aggressivity.
9:24:45 AM
SENATOR WIELECHOWSKI shared his understanding that the S&P 500
returned 40 percent over the past two years. He asked how that
compares to the fund's performance.
MR. MITCHELL did not know the answer. Over the past 10 years,
however, a passive asset allocation would have cost the fund $14
billion.
SENATOR WIELECHOWSKI pointed out that the S&P 500 averaged 8.9
percent over the past 100 years. He sought to verify that the
fund has not averaged that same amount.
MR. MITCHELL cited an analysis by APFC's chief risk officer,
which found that in a draw scenario, the internal rate of return
diminishes in a 100 percent S&P 500 model.
9:27:57 AM
SENATOR WIELECHOWSKI asked how much the fund has paid in fees
over the past two years.
MR. MITCHELL said the fee structure is high due to the private
market exposure. He explained that in private markets, a 2
percent annual fee is required to participate in a partnership.
Nonetheless, the private equity portfolio is the fund's
strongest performing asset class over the past 10 years, which
has outperformed the S&P 500. He indicated that the high fees
are paid in exchange for outsized returns.
SENATOR WIELECHOWSKI pointed out that in the past several years,
the fund has underperformed the market and paid extraordinarily
high fees.
MR. MITCHELL said a broader conversation on the issue would be
beneficial. He acknowledged that private equity is in a trough
relative to investment in public equities.
9:30:26 AM
MR. MITCHELL resumed the presentation on slide 9, "Saving
Wealth, Investing, & Providing Income," which read as follows
[original punctuation provided]:
From the first deposit of $734,000 of Trans-Alaska
pipeline royalties the Alaska Permanent Fund has
Grown to over $80.8 billion, as of Jan. 31, 2025
An annualized total return of 8.71%, as of Dec. 31,
2024
Generated more than $91.0 billion in realized
earnings as of Dec. 31, 2024, that have supported -
the dividend, the General Fund, and inflation-proofing
for intergenerational benefit.
9:31:58 AM
VICE CHAIR FIELDS asked what the size of the fund would be if
dividends had never been paid and, instead, reinvested into the
fund.
MR. MITCHELL said if all the earnings had flowed to the general
fund and been spent, the fund would be at $20 billion. He added
that including unrealized gains, earnings total around $106
billion for the life of the fund, of which an estimated $40
billion were expended on the POMV or Permanent Fund Dividends
(PFDs).
VICE CHAIR FIELDS requested a follow-up response on the
compounded returns had the money not been spent on dividends.
9:33:17 AM
MR. MITCHELL resumed the presentation on slide 10, which
highlighted the volatility of Alaska's revenue on a historical
basis since the discovery of oil on the North Slope. He noted
the creation of the CBR after the 1980s acted as a natural shock
absorber until the price dropped in late 2014 and didn't recover
for 5 or 6 years. In 2019, the creation of the POMV transfer
created a huge stabilizing factor for state revenue on an
annualized basis despite volatility with the underlying oil
revenue.
9:35:22 AM
MR. MITCHELL turned to slide 11, which showed the nuances of the
two-account structure. The fund's total value as of January 31,
2025is $80.8 billion with $71.4 billion in the Principal, of
which $12.8 billion is unrealized gains that are allocated to
Principal in the aforementioned pro rata basis. To the extent
those earnings are realized, that money shifts over to the ERA.
Consequently, $58.6 billion is truly protected as Principal.
The ERA totals $9.4 billion of which $3.8 billion is committed
to the FY 26 POMV transfer, $1 billion is committed to FY 25
inflation proofing, and $1.7 billion is a pro rata share of
total unrealized gains. Consequently, as of January 31, 2025,
there is $2.9 billion of spendable realized earnings in the ERA
available for FY 26 inflation proofing and FY 27 POMV.
9:37:28 AM
MR. MITCHELL turned to slide 12, "Key Drivers in the ERA," which
read as follows [original punctuation provided]:
ERA's Decreasing Availability
The ERA AS 37.13.145 (a) is available for Legislative
appropriation through a simple majority vote.
It grows through the realized investment income that
is defined as Statutory Net Income (SNI) AS 37.13.140
(a).
Looking Forward
FY27 POMV Draw = $4.0B
(to be committed in FY26 financials)
Inflation Proofing for FY26 = $1.5B est.
(to be committed based on appropriation, with final
calculation at the close of FY26)
----------------------------------------------
Total Commitments in FY26 = $5.5B
ERA Realized Avail FYTD 25= $2.9B as of Jan Statutory
Net Income FY25 = $4.2B projected
MR. MITCHELL explained that at the start of FY 25, for the first
time ever there was a shortfall of $400 million in the ERA after
providing for FY 25 inflation proofing and POMV, and FY 26
commitments.
9:38:09 AM
MR. MITCHELL continued to slide 13, "Spending is Limited to the
ERA," which read as follows [original punctuation provided]:
The Earnings Reserve Account faces the risk of
depletion due to annual withdrawals for state revenues
and the need for inflation protection of the Principal
for future benefits to Alaskans.
Long-Term Investment Focus
• Realized earnings generated through investment
activity are prioritized by maximum long-term return
mandates, not realized gains.
• The ERA grows through the realization of investment
income, which is inherently volatile and
unpredictable.
Limited Realized Earnings Availability
• Due to the two-account structure, spendable amounts
are limited to what's available in the ERA, which is
subject to commitments based on appropriations and
known obligation at the beginning of each fiscal year.
Inflation-proofing has been inconsistent, given the
state's need for predictable revenue to provide for
general fund services and programs.
9:39:01 AM
REPRESENTATIVE EDGMON asked whether the legislature has the
authority to appropriate the fund's unrealized earnings.
MR. MITCHELL said the appropriation of unrealized gains would be
a legal question and potentially litigable.
MR. BRUNE pointed out that a simple majority of each body would
allow access to those funds.
SENATOR STEDMAN cautioned against overlooking the benefit of the
endowment concept, which would restrict the ability to
appropriate over the limit of the POMV draw.
9:41:27 AM
MR. MITCHELL paraphrased slide 14, "Manual Inflation Proofing,"
which read as follows [original punctuation provided]:
FY 16: Inflation proofing not funded for the first
time
FY 20: Special $4B appropriation with intent language
for inflation proofing the Principal
Ch 1 FSSLA 2019 amended. ? It is the intent of the
legislature that the amount appropriated in this
subsection not include associated unrealized gains;
and be used to satisfy the inflation proofing
requirement under AS 37.13.145(c) for the next four
fiscal years.
FY 22: Special $4B appropriation. Deposited to
Principal
Ch 1 SSSLA 2021. ?(f) The sum of $4,000,000,000 is
appropriated from the earnings reserve account (AS
37.13.145) to the principal of the Alaska permanent
fund.
9:42:46 AM
MR. MITCHELL paraphrased slide 16, "The Need for Reform," which
read as follows [original punctuation provided]:
Consolidation to a Single-Fund endowment model would
align the Permanent Fund with best practices for
intergenerational wealth funds.
For the Present
• Ensure the option of an annual payout to support
dividends and government services.
• Maintain stable payouts from year to year.
• Make payout method compatible with investment
strategy.
For the Future
• Prevent overspending in the good years.
• Maintain purchasing power for the entire Fund.
The two-account structure is outdated and conflicts
with best practices in sovereign wealth fund
management.
The ERA is at risk of depletion given the annual draws
to support government services and the divided
program, as well as inflation proofing the Principal
for intergenerational Alaskan benefit.
9:44:09 AM
MR. BRUNE paraphrased slide 17, "Constitutional Amendment,"
which read as follows [original punctuation provided]:
The Board of Trustees has been on record for more than
twenty years supporting the transition to a Single-
Fund endowment to protect its intergenerational
sustainability and ensure that it provides for all
generations.
Board Resolutions 2000-13, 2003-05, 2004-09
• Supporting a constitutional amendment to limit
the annual Fund payout to not more than a 5% POMV
averaged over a period of 5 years.
• Implementing a constitutional POMV spending limit
has the accompanying benefit of assuring
permanent inflation-proofing of the Fund.
MR. BRUNE added that the endowment model would resolve the
inflation proofing issue.
9:45:19 AM
MR. BRUNE summarized the Trustees' Paper Volume 10 on slide 18,
which proposes a change from the two-account structure The
Principal and the ERA to one account.
9:46:03 AM
MR BRUNE turned to slide 19, "Proposed Single-Fund Endowment
Model," which read as follows [original punctuation provided]:
Adopting this model, which would include a
Constitutionally established spending limit, would
strengthen the Fund's long-term stability and
purchasing power for future generations.
• Merge the Principal and the ERA into a Single-Fund.
• Limit annual distributions through a Constitutional
Percent of Market Value Rule.
• Ensure automatic inflation proofing by adhering to a
long-term sustainable withdrawal rate.
•
The change to a Single-Fund would ensure that an
annual POMV transfer would be available each year but
would not affect the discretion in deciding how to
spend the money.
The power of appropriation remains with the
Legislature, while the annual draw from the Fund would
be limited.
9:46:49 AM
MR. MITCHELL paraphrased slide 20, "Benefits of the Single-Fund
Model," which read as follows [original punctuation provided]:
Aligned with global best practices, strengthening
Alaska's financial position through sustainable
withdrawals & limited to the Fund's long-term real
return
Total-Return Investing:
Maximizes long-term growth without liquidity
constraints.
Predictable & Sustainable Spending:
A maximum draw POMV rule prevents overspending.
Automatic Inflation Proofing:
Eliminates need for manual and ad hoc legislative
adjustments.
Alignment with Prudent Investor Standards:
Follows best practices for endowments and trusts.
A Single-Fund Endowment is permanently inflation-
proofed and ensures the Fund's real value is
maintained over time while supporting its intended
beneficiaries.
The key principles behind this are:
• Growth in the Fund's value keeps pace with or
exceeds inflation.
• A prudent spending rule/limited draw rate ensures
sustainability.
• Returns above the draw rate are reinvested.
9:47:31 AM
MR. MITCHELL paraphrased slide 21, "Comparing Fund Structures,"
which read as follows [original punctuation provided]:
The Endowment Model is not constrained in providing
the set annual POMV draw, while the two-account
structure is limited to the ERA's available balance.
Endowment Retains Earnings
• Under the Single-Fund Endowment Structure, income
would be calculated according to generally
accepted accounting principles, meaning all
earnings (realized and unrealized) would be
retained within the Fund.
• All earnings are retained and reinvested in the
Single-Fund, thus eliminating the need for
inflation proofing.
MR. MITCHELL explained that under the current two-account
structure, 73 percent of the fund is constitutionally protected,
whereas 95 percent of the fund would be protected under the
proposed endowment model. He refuted the idea that the shift to
one account would add additional risk to the invasion of
Principal.
9:48:38 AM
MR. MITCHELL paraphrased slide 22, "Policy Recommendations,"
which read as follows [original punctuation provided]:
The Board of Trustees recognizes that implementing
policy reform requires legislative action and
widespread public support.
Constitutional Amendment (Preferred Approach)
• Enshrine a Single-Fund permanent endowment model
with a limited POMV spending rule in the Alaska State
Constitution Ensures long-term sustainability and
intergenerational equity.
Statutory Reforms
• Combine the two accounts and establish the permanent
endowment model in statute
Rules-based mechanisms require consistent
discipline.
Suspend inflation proofing when the ERA balance
approaches minimum levels
Impacts intergenerational benefit.
• Force realization of capital gains to stabilize ERA
balances
Impacts APFC's ability to manage the portfolio
to a maximum risk-adjusted return over the long
term and erodes intergenerational benefit.
A constitutional amendment to establish a Single-Fund
endowment the ultimate solution
"The combination of a single-account structure and a
Constitutional limit on POMV draws linked to the
Fund's long-term real return?will complete the
transition to a permanent-endowment model, with the
following attractive features and characteristics:
• Total return investing
• POMV spending and automatic inflation proofing
• Alignment with the Prudent Investor Law and best
practices.
• Fit for purpose"
- Trustees' Paper Volume 10 Dr. Malan Rietveld
Sovereign Wealth Fund Expert
9:51:23 AM
MR. MITCHELL concluded on slide 23, which featured the graphic
from slide 5 showing the flow of funds in the single fund
endowment model.
MR. BRUNE explained that APFC's statutory mandate is to maximize
risk adjusted returns for the people of Alaska. Consequently,
the focus is on diversification rather than going all in on the
stock market, which in a down year, would not have allowed the
legislature to fund state services or the PFD. He acknowledged
that some private equity funds have large fee structures, but
the overall cost of the Alaska Permanent Fund is much smaller
than most funds. He concluded that a single-fund endowment
would bring more predictability than the current two-account
structure.
9:53:16 AM
VICE CHAIR FIELDS questioned the best way to describe this
proposal to the public.
MR. MITCHELL described it as the protection of the state's most
important revenue source for future residents of the state while
recognizing past sacrifices. He compared the fund to fish and
wildlife resources, explaining that those resources are managed
in a way that ensures their longevity for future Alaskans.
MR. BRUNE quoted a past mentor who said, "It must fit on a
bumper sticker." He said the focus should be on two words:
predictability and sustainability.
9:55:35 AM
REPRESENTATIVE JOSEPHSON asked how many years the extra
contributions would suspend inflation proofing.
MR. MITCHELL said the additional $1.95 billion of inflation
proofing would cover the coming year.
9:56:31 AM
SENATOR STEDMAN emphasized the importance of inflation proofing
the fund for future generations of Alaskans. He suspected that
a discussion would be had during this budget cycle on how much
to inflation proof.
9:57:14 AM
VICE CHAIR FIELDS considered whether the public should be given
the option to go beyond inflation proofing and grow the fund to
sustain state operations in a post-oil environment. If the
legislature were to assume long-term declines in oil revenue
over the next 30 years, he asked what draw percentage would grow
the fund while simultaneously funding operations.
MR. MITCHELL said that calculation would require an identifiable
target. He explained that drawing less from the fund would
create an expectation of growth, adding that annual deposits
from royalty revenue are still being made in the amount of $400
million. He stated that the question would need to be answered
from a policy perspective and offered to follow up with the
requested information.
MR. BRUNE returned to slide 8 and reiterated that CPI plus 5
percent is a difficult objective; however, endowments typically
target a 4 to 5 percent threshold. He reiterated that smaller
draws leave more to be grown for future years.
9:59:47 AM
SENATOR STEDMAN pointed out that the Alaska Mental Health
Trust's target of 4.25 percent has been predictable and stable.
He recommended that the legislature consider that for
comparison.
10:00:32 AM
ADJOURNMENT
There being no further business before the committee, the
Legislative Budget and Audit Committee meeting was adjourned at
10:00 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| LBAC Agenda 03.04.25.pdf |
JBUD 3/4/2025 9:00:00 AM |
|
| POMV in Alaska's Budget by LegFi 03.04.25.pdf |
JBUD 3/4/2025 9:00:00 AM |
|
| Trustees Paper 10_ A Rules Based Endowment by APFC 03.04.25.pdf |
JBUD 3/4/2025 9:00:00 AM |
|
| APFC Trustees Paper 10.pdf |
JBUD 3/4/2025 9:00:00 AM |
|
| 202503_APFC Follow Up_LB&A Committee on March 4.pdf |
JBUD 3/4/2025 9:00:00 AM |