Legislature(2025 - 2026)BUTROVICH 205
03/24/2025 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska's Renewable Financial Resource | |
| Presentation: Alaska's Renewable Revenue Curriculum | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 24, 2025
3:30 p.m.
DRAFT
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Bill Wielechowski, Vice Chair
Senator Matt Claman
Senator Forrest Dunbar
Senator Scott Kawasaki
Senator Shelley Hughes
Senator Robert Myers
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION: ALASKA'S RENEWABLE FINANCIAL RESOURCE
- HEARD
PRESENTATION: ALASKA'S RENEWABLE REVENUE CURRICULUM
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DEVEN MITCHELL, Executive Director and Chief Executive Officer
(CEO)
Alaska Permanent Fund Corporation
Juneau, Alaska
POSITION STATEMENT: Provided the presentation: Alaska's
Renewable Financial Resource.
ELLA EDE, Executive Director
Alaska Resource Education
Anchorage, Alaska
POSITION STATEMENT: Co-presented: Alaska's Renewable Revenue
Curriculum.
TAYLOR BURGH, Operations Manager
Alaska Resource Education
Anchorage, Alaska
POSITION STATEMENT: Co-presented: Alaska's Renewable Revenue
Curriculum.
ACTION NARRATIVE
3:30:16 PM
CHAIR GIESSEL called the Senate Resources Standing Committee
meeting to order at 3:30 p.m. Present at the call to order were
Senators Myers, Dunbar, Kawasaki, Claman, Wielechowski, and
Chair Giessel. Senator Hughes arrived shortly thereafter.
^PRESENTATION: ALASKA'S RENEWABLE FINANCIAL RESOURCE
PRESENTATION: ALASKA'S RENEWABLE FINANCIAL RESOURCE
3:30:44 PM
CHAIR GIESSEL announced the presentation: Alaska's Renewable
Financial Resource, by the Alaska Permanent Fund Corporation.
3:31:24 PM
DEVEN MITCHELL, Executive Director and Chief Executive Officer
(CEO), Alaska Permanent Fund Corporation, Juneau, Alaska,
presented: Alaska's Renewable Financial Resource.
3:31:53 PM
MR. MITCHELL moved to and narrated slide 2:
[Original punctuation provided.]
A Legacy of Intergenerational Resource Contribution
Alaskans' Extraordinary Vision
In 1976 -
Alaskans chose to permanently forgo immediate use of
at least 25 percent 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 for converting finite resources into
lasting wealth.
• Supports Alaska
Provides over 50 percent of the state's unrestricted
general fund revenue for dividends and essential
services.
Alaska Constitution Article IX, Section 15
Alaska Permanent Fund
At least twenty-five percent of all mineral lease
rentals, royalties, royalty sale proceeds, federal
mineral revenue sharing payments and bonuses received
by the state shall be placed in a Permanent Fund, the
principal of which shall be used only for those
income-producing investments specifically designated
by law as eligible for Permanent Fund investments. All
income from the Permanent Fund shall be deposited in
the general fund unless otherwise provided by law.
3:32:16 PM
SENATOR HUGHES joined the meeting.
3:34:47 PM
MR. MITCHELL moved to slide 3:
[Original punctuation provided.]
Consistent Discipline
Stewardship
• Honoring the vision and sacrifices of the Alaskans
that created the Fund and leadership committed to
ensuring that a portion of our mineral wealth is
saved and invested to benefit all Alaskans, today
and tomorrow.
• Protecting the Principal and maximizing investment
returns for the benefit of current and future
generations of Alaskans.
• Providing a predictable revenue stream to help
balance the State's budget now and into the future.
MR. MITCHELL said discipline had been a key component of the
fiscal strategy that permeated the Permanent Fund's existence,
with each year of policymakers and Alaskans representing a
generation and every generation honoring this tradition. He
compared this discipline to the principle of maximum sustainable
harvest, noting that one does not set a net across a river to
catch every fish because doing so would limit future
generations' ability to fish. In the same way, each successive
generation had set money aside through constitutionally
mandated, statutory, ad hoc, and inflation-proofing
contributions to build the Permanent Fund to its current level.
He emphasized that the Permanent Fund's structure required
significant manual inputs and created difficulties when
investment revenues were insufficient or when there was pressure
to take more than a generation's fair share. He said this was an
inherent weakness of the Fund's current construct.
3:36:22 PM
CHAIR GIESSEL asked to return to slide 2 and questioned a prior
statement about transferring an additional 25 percent into the
Permanent Fund, asking for clarification about the origin of the
additional 25 percent.
3:36:49 PM
MR. MITCHELL explained that the additional contributions came
from the same revenue sources defined in the constitution,
primarily mineral leases, rentals, and oil royalties from North
Slope production, including certain fields that began producing
after 1979. He acknowledged that this did not fully double the
constitutionally required contribution but had nonetheless been
a significant source of funding.
3:37:29 PM
MR. MITCHELL moved to and narrated slide 4:
[Original punctuation provided.]
AS 37.13.020
The legislature's findings for the purpose of the
Permanent Fund:
• 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.
• Permanent Savings
• Maximum Risk-Adjusted Returns
• Use of Earnings: Driven by Legislation
MR. MITCHELL said the Fund's investments reflected Alaska's
generally conservative approach, minimizing risk and preserving
capital. By statute, earnings were placed into a separate
earnings reserve account, where they remained until appropriated
by the legislature. He noted that the Fund's return objective
did not focus on realized income, and under modern accounting
practices, unrealized gains were recorded when they occurred but
were not immediately available for spending. Instead, these
unrealized earnings shifted between the principal and the
earnings reserve under a pro rata framework until realized
through asset sales, which often caused confusion when
discussing balances in either account.
3:40:03 PM
SENATOR DUNBAR referred to prior discussions in the finance
subcommittee about how the Permanent Fund helped insulate state
savings from a potential economic downturn. He noted that gold
prices had reached record or near-record highs, reportedly
benefiting Alaska gold mines. He questioned whether higher gold
prices meaningfully affected deposits into the Permanent Fund or
whether the Fund's revenue sources, which he noted were
primarily oil revenues, were largely insulated from changes in
gold prices.
3:41:00 PM
MR. MITCHELL said he did not know the exact amount but noted
that the Tax Division's annual revenue sources book showed
mineral revenue deposits into the Permanent Fund. Based on his
last review, gold-related revenues amounted to only a few
million dollars, which was small compared to oil revenues that
generated hundreds of millions of dollars when oil prices were
in the $70 range. He said that even if gold revenues doubled,
they would still represent a relatively minor contribution
compared to oil.
3:41:42 PM
SENATOR DUNBAR noted a recent presentation from the mining
industry showing corporate taxes had dropped to nearly zero,
though the presenter thought it might have been a calculation
error. He remarked how little revenue Alaska received from
mining at only a few million dollars per year, even with gold at
$3,500 an ounce, highlighting the relatively small contribution
compared to North Slope oil.
3:42:24 PM
MR. MITCHELL commented on the financial impacts of mining,
noting that the location of mines on federal versus state land
affected how royalties were distributed. Mines on federal land
generate revenue for the federal government, which may or may
not benefit the state of Alaska. He noted that mines also
significantly support local tax bases, as seen with the Red Dog
Mine funding schools in the Northwest Arctic Borough. Similarly,
he noted that hard rock mines near Juneau contributed
substantially to local taxes. He suggested that, from a state
perspective, projects on state land were worth examining for
their financial benefits.
3:43:27 PM
MR. MITCHELL moved to slide 5, highlighting Alaska's impressive
financial strategy of diversifying its economy by investing
Permanent Fund money globally, reducing reliance on state-
generated revenue. He said the fund was initially invested
entirely in fixed income in 1980, and gradually expanded into
equities, real estate, private equity, hedge funds, and other
asset classes to optimize returns while managing risk. He
explained that annual evaluations assess risk, asset allocation,
and performance against benchmarks to meet long-term targets,
including CPI plus five percent, ensuring sustainable income for
the state:
[Original punctuation provided.]
Global Investment
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.
The Alaska Permanent Fund is the largest sovereign
wealth fund in the U.S. and is recognized globally as
a model for converting a nonrenewable natural resource
into a renewable financial resource.
[Slide 5 includes a global map illustrating worldwide
APF investments.]
[Slide 5 includes pie charts illustrating the asset
allocation evolution of the Permanent Fund from 1980
to 2025, including the following assets:
• Public Equities
• Fixed Income
• Private Equity
• Real Estate
• Private Income
• Absolute Return
• Tactical Ops
• Cash]
3:46:43 PM
SENATOR MYERS said he would like to see how the Fund's
performance compared to standard benchmarks, such as the S&P 500
or Dow Jones Industrial Average.
3:47:13 PM
MR. MITCHELL replied that the Fund's asset allocation followed a
statutory framework shaped by past legislators, reflecting a
long-standing conservative, low-risk approach.
3:47:50 PM
MR. MITCHELL moved to slide 6 and observed the dip during the
20082018 period to illustrate how the global financial crisis
caused severe losses, highlighting the risks of relying on
strong past performance. He emphasized that, even with recent
strong equity returns, historical precedent and potential
overvaluation made future returns uncertain, underscoring the
importance of diversification. He said he wouldn't necessarily
suggest a return to the 1980 asset allocation, but there was
room for discussion about adjusting strategies with input from
financial professionals.
[Original punctuation provided.]
A maximum risk-adjusted return
Investing for the Long Term
[Slide 6 provides a bar graph illustrating: Total
return = Inflation + Real Return compared with the
Return Objective (CPI+5 percent) for ten year
increments]
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 longterm target
while conforming to the Board's approved risk
appetite metric.
3:50:36 PM
SENATOR WIELECHOWSKI referred to the graph on slide 6 and asked
for clarification. He asked whether return objectives had been
met.
3:51:32 PM
MR. MITCHELL said slide 6 illustrated rolling 10-year periods,
showing that roughly half of those periods achieved a return of
Consumer Price Index (CPI) plus 5 percent, while the other half
did not, particularly in the decade following a global financial
crisis. He said CPI plus 5 percent was a challenging benchmark.
In any given year the target may or may not be met, but over the
long term it appeared to represent an upper-end, realistically
achievable return for a relatively risk-averse portfolio.
3:52:32 PM
SENATOR MYERS asked why the graph was displayed in ten-year
increments, noting that the Permanent Fund draws were based on
five-year increments.
3:52:43 PM
MR. MITCHELL said he hadn't thought of it that way, but that
could be done for the committee. He said he expected five-year
increments would also demonstrate that the return objective was
met about half the time.
3:53:20 PM
MR. MITCHELL moved to and narrated slide 7:
[Original punctuation provided.]
Alaska's Largest
Revenue Source
FY24 $80,038.4
FY23 $77,587.5
FY22 $75,912.8
AS 37.13.140 (b) FY21 $81,472.4
Fund Value-Based FY20 $64,877.8
-------------------
FY26 POMV Avg. $75,977.8
Draw Calculation 5 percent $ 3,798.9
Percent of Market Value Draws
FY19-FY25
$ 22.4 billion over 7 fiscal years.
FY26 is $ 3.8 billion.
FY27 is $ 4.0 billion estimated.
The Shift in Alaska's Revenue
Alaska's budget has transitioned from primarily
relying on nonrenewable mineral royalty resources to
depending on sustainable financial revenues generated
by investments from the Fund.
[Slide 7 includes a graph illustrating the "State of
Alaska Unrestricted General Fund Revenues in $
millions" from FY 1959 through FY2028, including
Petroleum and Non-Petroleum Revenues, PFD from ERA,
and POMV from ERA.]
The POMV draw, enacted in 2018, has exceeded
traditional revenue sources in providing unrestricted
general fund revenues.
3:53:23 PM
MR. MITCHELL said the state's revenue shifted dramatically in
2019 with the implementation of the Percent of Market Value
(POMV) draw. He noted the high volatility of the state's primary
revenue source [oil] prior to 2019. He said the state was able
to manage the volatility using the Constitutional Budget Reserve
(CBR) through the 1990s. Combined with the high-revenue years of
2005 to 2007, this allowed for relatively levelized spending,
with the CBR acting as a shock absorber during tough years.
Using the CBR in that manner stopped being sustainable after oil
prices fell in the second half of 2014 and stayed at very low
levels for the next four to five years. As the CBR was drawn
down, it became clear that additional revenue was needed to
continue providing state services, leading to the creation of
the Percent of Market Value (POMV) transfer: transferring 5
percent of the average Permanent Fund balance over the last five
completed fiscal years to the state. The POMV transfer was about
$3.8 billion for fiscal year 2026 and was projected at roughly
$4 billion for fiscal year 2027.
3:55:41 PM
MR. MITCHELL said reliance on the use of the Permanent Fund
increased significantly after 2019. Before 2019, only a portion
of earnings was used, half of 21 percent of the last five years
of earnings went to dividends, and the other half was saved,
growing the fund each year. After 2019 the state began relying
on Permanent Fund revenue not just for dividends, but also to
support state expenditures. He compared this financial behavior
to that of a retiree.
3:56:28 PM
SENATOR DUNBAR referred to the graph on slide 7. He asked
whether the figures represented real adjusted dollars or nominal
dollars.
3:56:45 PM
MR. MITCHELL said they were nominal dollars.
3:56:50 PM
SENATOR DUNBAR concluded that the Permanent Fund's recent
earnings were significantly lower than oil [earnings].
MR. MITCHELL concurred.
3:57:04 PM
MR. MITCHELL moved to slide 8:
[Original punctuation provided.]
The Permanent Fund Total Value $81.3B
As of February 28, 2025
[Slide 8 includes a pie chart graphic illustrating the
Permanent Fund's total value.]
$71.5B Principal:
$58.7 Permanent Deposits
$12.8 Unrealized Gains
$9.8B Earnings Reserve Account (ERA):
$3.8B for the FY26 POMV - Committed
for the Percent of Market Value "POMV" Draw to the
state's general fund for dividends and government
services
$1.0B for Inflation Proofing - Committed
for the FY25 transfer to the Principal for
intergenerational purchasing power given the two-
account structure
$3.2B "Spendable" Earnings
Available as realized income
$1.8B Unrealized Gains
Represents changes in asset values from the purchase
date to the most current
3:57:12 PM
MR. MITCHELL said the situation with the Permanent Fund was not
as straightforward as it might appear. Under the present two-
account structure, the earnings reserve account held about $9.8
billion, but a $3.8 billion draw was scheduled for FY 2026. In
addition, $1 billion had already been appropriated in the
current fiscal year for inflation proofing, and $1.8 billion of
the earnings reserve balance consisted of unrealized gains that
could not be treated as statutory net income. After accounting
for those factors, there was about $3.2 billion in spendable
earnings. At the same time, he said the state must set aside the
FY 2027 POMV transfer on July 1, 2025, one year in advance. That
transfer was projected at $4 billion, meaning current spendable
earnings were not sufficient and additional earnings were needed
this year. He pointed out that there was very little left
available for inflation proofing.
3:58:35 PM
MR. MITCHELL said to maintain liquidity in the earnings reserve
account, the legislature had effectively avoided inflation
proofing. He noted that the principal was often cited as $71.5
billion, but argued that figure included $12.8 billion in
unrealized gains, and only about $20 billion represented actual
royalty revenue deposited into the fund. He said that, under the
current structure, the amount theoretically appropriable,
potentially requiring statutory changes, was about $22 billion.
MR. MITCHELL concluded that the existing framework had not kept
pace with accounting practices, asset allocation, or the total-
return investment objectives of the Alaska Permanent Fund.
3:59:40 PM
SENATOR MYERS referred to the $12.8 billion in unrealized gains
and asked, if that asset were to be sold, whether those gains
would end up in the principal or in the earnings reserve
account.
3:59:58 PM
MR. MITCHELL said the gains would go in the earnings reserve
account.
4:00:03 PM
SENATOR MYERS asked why unrealized gains were counted as part of
the principal when, once they were realized and converted to
cash, they ultimately went into the earnings reserve account.
4:00:21 PM
MR. MITCHELL explained that an attorney general's opinion
required unrealized gains and losses to be reported [in the
earnings reserve account]. Before that opinion, unrealized gains
or losses could have been held in the earnings reserve account,
but doing so would have left an insufficient balance to pay
dividends. After a period of negative market performance with
significant unrealized losses, keeping those losses in the
earnings reserve account would have effectively depleted it from
an accounting standpoint. As a result, the current methodology
was adopted.
4:01:19 PM
MR. MITCHELL moved to slide 9:
[Original punctuation provided.]
Proposed: Single-Fund Endowment Model
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
POMV 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.
MR. MITCHELL explained that for more than 20 years the trustees
have advocated replacing the two-account, earnings-based
structure with a single endowment model to eliminate the risk of
overdrawing the Permanent Fund, reduce intergenerational equity
concerns, remove the possibility of failed transfers due to
statutory constraints, and simplify the system to one inflow
consisting of royalty revenues deposited into the fund, and one
outflow, the POMV transfer to the State of Alaska.
4:02:21 PM
MR. MITCHELL suggested that concerns about how this change would
affect the Permanent Fund Dividend were separate from the
proposed structural changes. He opined that, if anything, the
change could increase the likelihood of a dividend because it
would provide regular, recurring revenue. He said the process
for determining the dividend would remain essentially the same,
with the legislature continuing to appropriate funds for it each
year.
4:03:11 PM
SENATOR HUGHES referred to slide 8 and noted that, in the
earnings reserve account breakdown, the first two segments
represented the upcoming fiscal year's budget starting July 1.
She asked for confirmation that the projected $4 billion POMV
draw, combined with inflation proofing, would essentially
consume the remaining two portions of the earnings reserve
account.
4:03:43 PM
MR. MITCHELL explained that inflation proofing for the coming
year was estimated at $1.4 to $1.6 billion, which, combined with
a $4 billion [Percent of Market Value (POMV)] draw, would total
roughly $5.5 billion and create a deficiency if only $3.2
billion were available on July 1. He noted that this situation
had already occurred. In the current year there was a roughly
$400 million shortfall because only $4.4 billion was available
to cover a $3.8 billion POMV draw and $1.0 billion for inflation
proofing. He said this was the first time such a deficiency
happened.
4:04:22 PM
SENATOR HUGHES noted there was a resolution for a constitutional
amendment that would appear on the fall 2026 ballot. She asked
whether there would be sufficient funds in the earnings reserve
for fiscal year 2028, beginning January 1, 2027, if the
amendment did not pass.
4:05:01 PM
MR. MITCHELL said it depended [on market performance]. He
referred to Legislative Finance modeling suggesting a 30 to 40
percent chance of being unable to make the POMV draw at the
start of the fiscal year, though positive earnings during the
year could still ultimately cover it. He said the concern was
less immediate and more about risk management: the state
currently has options and runway, but a severe, multi-year
market downturn could create vulnerability. He noted that during
the dot-com era, there were a couple years when the statutory
net income from the Permanent Fund was in the hundreds of
millions of dollars. He said a similar scenario could quickly
allow for a [POMV] transfer.
4:06:20 PM
SENATOR HUGHES acknowledged the need for conservative financial
assumptions and expressed concern about relying on large
returns. She highlighted excitement about the recent Sockeye-2
oil discovery and said that the project could be fast-tracked,
was on state land, and could generate over 16 percent in
revenues and royalties for the state. She asked whether such
potential future projects were considered in planning or only
accounted for once they actually materialize.
4:07:00 PM
MR. MITCHELL said [the Permanent Fund] did not actively analyze
projected revenue sources and instead accounted for revenue as
it was received each year. He pointed out that annual revenue of
about $400 million would be beneficial, but had a much smaller
impact on the fund's sustainability now that the fund was $8082
billion, compared to when it was much smaller.
4:07:32 PM
SENATOR CLAMAN asked whether merging the [earnings reserve and
the principle] would allow the legislature to spend from the
principle of the fund.
4:07:55 PM
MR. MITCHELL moved to slide 12 to answer the question. He
explained that while the current earnings-based model appeared
to better protect the fund's principal, it left a much larger
amount, $22 billion, available for appropriation compared to
$3.8 billion under the proposed single-account, percent-of-
market-value endowment model. He said extreme, prolonged market
downturns could theoretically risk principal under the new
model, but that the fund's built-in discipline, retaining
earnings in strong years, would generally provide greater
resilience. He opined that the current structure put the
principal more at risk than the proposed model:
[Original punctuation provided.]
Comparing Fund Structures
The Single-Fund 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.
$81.3 Billion Total Fund Value, FYTD as of February
28, 2025
Current Proposed
Two-Account Structure Endowment Model
Constitutionally Constitutionally
Protected: Protected:
72 percent% | $58.7 billion 95 percent | $77.5
billion
[Slide 12 includes pie charts comparing the two
models.]
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.
4:09:47 PM
SENATOR CLAMAN asked whether, under the current system without
an endowment model, the legislature already had the authority to
appropriate funds from the principal.
4:10:14 PM
MR. MITCHELL explained that much of what was labeled principal
was not constitutionally protected. He said $12.8 billion in
unrealized earnings could become spendable through legislative
actions, such as skipping inflation proofing or mandating
realization of those earnings. Additionally, funds already in
the earnings reserve could be appropriated relatively easily. He
said the current two-account structure allowed greater access to
spendable funds and required more fiscal discipline than the
proposed single-account POMV payout model.
4:11:42 PM
SENATOR WIELECHOWSKI asked whether a single-fund endowment
(POMV) model reduced the risk, during market downturns, of
forced asset sales at depressed prices to generate realized
earnings needed to meet payout requirements, compared with the
current structure.
4:12:10 PM
MR. MITCHELL said there was no clear yes-or-no answer. He
explained that in market downturns, liquidity constraints,
especially in private market assets, made it harder to rebalance
portfolios, so cash needs were typically met by drawing from
liquid public equities. He said this challenge existed under
both the current structure and a single-fund endowment model. He
acknowledged that repeated draws can complicate rebalancing in
weak markets, but he opined that the risk was not materially
greater under a unified fund structure.
4:14:15 PM
SENATOR WIELECHOWSKI suggested that a single-fund endowment
model may provide greater flexibility to invest for the long
term, since short-term market downturns would not force the
realization of earnings. He opined that this could allow
investments to be held through recoveries and potentially
support higher long-term returns.
4:14:57 PM
MR. MITCHELL explained that the Permanent Fund was not managed
to maximize statutory net income or the realization of earnings,
so moving to a single-fund endowment model would not materially
change current investment practices. However, if the legislature
were to require investments to prioritize statutory net income,
that could harm performance by limiting exposure to higher-
return, illiquid assets like private equity, which are expected
to perform best over the next decade.
4:16:21 PM
SENATOR MYERS questioned whether the single-account model truly
protected funds over the long term, noting that historical data
showed extended periods when returns did not meet a 5 percent
plus CPI threshold. He interpreted a 46 percent probability of
underperformance as suggesting the proposed draw rate may be too
high and asked whether that conclusion was correct.
4:17:17 PM
MR. MITCHELL explained that the issue was largely a policy
choice. He pointed out that over most 10-year periods, returns
were sufficient to support a 5 percent draw, even in weaker
markets. During those periods, the trade-off was that inflation
proofing may not occur, reducing purchasing power protection for
future generations. He said strong performance in other periods
can offset shortfalls from years when returns do not exceed
inflation plus the 5 percent draw.
4:18:20 PM
SENATOR MYERS argued that historical return data showed extended
periodsroughly 1999 to 2018when returns fell short of what was
needed to fully support a POMV draw plus inflation. He suggested
that if a POMV model had been adopted in the late 1990s, the
fund would likely be less valuable today due to higher spending
or erosion from inflation. He asked whether that interpretation
was correct.
4:19:05 PM
MR. MITCHELL confirmed that drawing 5 percent during that period
would have reduced the fund's value but noted that at the time
the fund was only used for Permanent Fund dividends, which
changes the outcome. He emphasized that failing to achieve
returns of CPI plus 5 percent for certain periods did not
automatically mean the fund's value would decline.
4:19:33 PM
SENATOR DUNBAR noted that the Permanent Fund supported moving to
a single-fund endowment model but that some commonly assumed
benefits, like enabling less risky or longer-term investing were
not actually accurate. He praised the fund's honesty and asked
for a clear, layman's explanation of the real benefits of
adopting the endowment model so he could explain it to
constituents.
4:20:42 PM
MR. MITCHELL explained that the main benefits of a single-fund
endowment model were increased certainty and long-term
sustainability. He said it would eliminate the risk of a failed
POMV transfer, which would be catastrophic given the state's
reliance on that revenue. The model would also prevent over-
drawing the fund for the benefit of one generation, limit access
to large portions of the fund that are currently appropriable,
and automatically account for inflation through the draw rate.
He acknowledged that market downturns remained a concern, and
suggested statutory guardrails, such as maximum draw rates or
flexibility to draw less in bad years, to guide future
legislatures and make the system more durable and reliable for
future generations.
4:23:28 PM
SENATOR CLAMAN noted that the legislature could come in and say
that the unrealized earnings were going to the earnings reserve.
He asked whether the legislature could also pass legislation
saying the unrealized earnings stay in the principal.
4:23:52 PM
MR. MITCHELL explained that the legislature could redefine what
counts as "principal," but doing so would undermine future
income by removing funds needed to generate regular realized
gains. He said the current investment structure relied on
building large unrealized gains from illiquid assets, which
later converted into realized income; eroding this "war chest"
exposed a fundamental structural weakness. As the earnings
reserve account has grown large, past legislatures have
sometimes transferred money from it into principal rather than
using money in the earnings reserve to fund government. He
emphasized that this lever was available to lawmakers, but it
could create long-term vulnerability by allowing one generation
to override the sacrifices and protections established by
earlier generations.
4:26:10 PM
MR. MITCHELL moved to slide 10. He said the proposed structure
[for the Permanent Fund] would simplify the current system by
combining contributions into a single investment account with
one unified asset allocation and a single payout, eliminating
the separate principal and earnings reserve structure and
reducing the policy levers lawmakers must manage:
[Original punctuation provided.]
Proposed:
Single-Fund Endowment
Contributions: Royalties, Special Deposits
\/
Alaska Permanent Fund
\/
Percent of Market Value (POMV)
Average Market Value for the first 5 of the preceding
6 Fiscal Years
Income Producing Investments
Alaska Permanent Fund Corporation Management and
Investment of the Fund
An annual appropriation from the Fund may be made to
support management and investment costs.
The Fund is invested in income-producing investments
with a limited annual draw.
The transition to a Single-Fund would guarantee
availability for an annual POMV transfer while
maintaining flexibility in how the money is utilized.
Annual draw certainty would ensure the ability to
provide for a dividend and essential government
services
4:26:51 PM
MR. MITCHELL moved to slide 11. He said the current system was
complex, with many moving parts that forced the legislature and
governor to make numerous policy decisions and continually
struggle to maintain fiscal discipline:
[Original punctuation provided.]
Current:
Two-Account Structure
Contributions
• Royalties
• Special Appropriations
• Inflation Proofing
Principle
Alaska Constitution,
Article IX, Section 15
Income Producing Investments
Alaska Permanent Fund Corporation
Management and Investment of the Fund
Single Asset Allocation (pro-rata shares)
Stocks, binds, Real Estate, Alternatives
Sale and Distribution of Assets
Statutory Net Income AS 37.13.140
Cash Flow Income
Realized gains/losses
Earnings Reserve Account
Alaska Statutes AS 37.13.145(a)
Realized gains/losses from sale of assets
Pro-Rata share of Investments and net unrealized gains
The Principal provides permanent savings to be used
only for income-producing investments.
Realized earnings are deposited into the Earnings
Reserve Account (ERA) for appropriation by the
Legislature.
POMV draws to support the state's current revenue
needs and transfers to inflation proof the Principal
for an intergenerational benefit are limited to the
balance of the ERA.
4:27:23 PM
MR. MITCHELL moved to slide 13. He concluded the presentation,
encouraging Alaskans and lawmakers to read Trustee Paper 10:
[Original punctuation provided.]
Trustees' Paper Volume 10
A Rules-Based Permanent Endowment Model for Alaska
"Within the world of sovereign wealth funds, the
Alaska Permanent Fund is admired and respected for its
long tradition of rules-based policymaking, prudent
investment management, and sound governance.
That said, the paper shows that the current two-
account structure introduces significant risks to the
ability to fund the annual POMV transfer that supports
the state budget and the Permanent Fund Dividend.
The paper outlines reforms that should be pursued with
urgency to ensure that the Fund continues to underpin
the sustainability of Alaska's public finances for
current and future generations."
Dr. Malan Rietveld
Sovereign Wealth Fund Expert
^PRESENTATION: ALASKA'S RENEWABLE REVENUE CURRICULUM
PRESENTATION: ALASKA'S RENEWABLE REVENUE CURRICULUM
4:28:04 PM:
CHAIR GIESSEL announced the presentation: Alaska's Renewable
Revenue Curriculum, by Alaska Resource Curriculum.
4:28:33 PM
ELLA EDE, Executive Director, Alaska Resource Education,
Anchorage, Alaska, praised legislators work to manage the
complexity of the Permanent Fund. She said Alaska Resource
Education, at the request of the Permanent Fund, accepted the
challenge to develop high-school curriculum to make the topic
understandable and engaging.
4:29:22 PM
MS. EDE explained that Alaska Resource Education was a 501 c3
nonprofit organization. She moved to and narrated slide 2:
[Original punctuation provided.]
Mission
Educate students about Alaska's natural resources.
Vision
Empower students to be informed stewards of Alaska's
natural resources.
Values
• Innovation
• Collaboration
• Flexibility
• Fun
4:30:10 PM
MS. EDE moved to and narrated slide 3:
[Original punctuation provided.]
ARE Board of Directors
Executive Committee
Clayton Gooden, Chair, NANA Regional Corp.
Casey Sullivan, Vice Chair, Marathon Petroleum
Elena Romerdahl, Secretary, Perkins Coie
Jerry Webre, Treasurer, Little Red Services
Terry Aldridge, Crowley
Logan Birch, Alaska Growth Capital
Lisa Cassino, Usibelli Coal Mine
Jessica Croffut, Matson
Mike Driscoll, ConocoPhillips
Corri Feige, Terra Piniun, LLC
Scott Habberstad, Alaska Airlines
Dave Hoeffel, Frontier Supply
Dave Karp, Saltchuk
Kyle Kohman, Santos
Rochelle Lindley, Coeur Alaska
Judy Patrick, Judy Patrick Photography
Pete Stokes, Petrotechnical Resources Alaska
Jason Brune, Executive Director Emeritus
4:30:17 PM
MS. EDE moved to and narrated slide 4:
[Original punctuation provided.]
ARE Core Team
Ella Ede, Executive Director
Beki Toussaint, Program Director
Taylor Burgh, Operations Manager
Natalie Gomez, Events & Marketing Manager
Brant Hylinski, STEM Educator
Naomi Mitchell, Interior Program Coordinator
Leola Rutherford, STEM Educator
MS. EDE introduced Taylor Burgh to continue the presentation.
4:30:33 PM
TAYLOR BURGH, Operations Manager, Alaska Resource Education
Anchorage, Alaska, moved to and narrated slide 5. She said ARE
provided instruction statewide, in person and on-line:
K-12 [Science, Technology, Engineering and
Mathematics] STEM Education
CLASSROOM VISITS
Guest teaching in schools across Alaska in person and
on Zoom
YOUTH PROGRAMS
Deeper explorations in after school programs, STEM
nights, & camps
TEACHER TRAININGS
Educating teachers about our resources and how to
implement them in the classroom
Rocks & Minerals What is a
Natural Resource
Energy Where do they come
from and how do we
get them?
Forestry What are the
associated careers?
4:31:42 PM
MS. BURGH moved to and narrated slide 6:
[Original punctuation provided.]
Spark
Spark interest in learning about Alaska's resources
Ignite
Ignite passion for understanding connections to our
resources
Launch
Launch into the next phase with the knowledge to make
informed decisions
4:32:32 PM
MS. BURGH moved to and narrated slide 7:
[Original punctuation provided.]
The Permanent Fund
Alaska's
Renewable
Revenue
Understanding of our largest financial resource
Alaska's Renewable Revenue Curriculum aligns with
state curriculum standards in high school Math,
Science, Government, and History incorporates:
• The Alaska Permanent Fund overview
• Investment management
• How the Fund converts nonrenewable resources into
a renewable economic resource
• Financial literacy
[Slide 7 included a table of state curriculum
standards for Maath, Science, Government and History
which are met by the Renewable Revenue Curriculum.]
4:33:41 PM
MS. BURGH moved to and narrated slide 8:
[Original punctuation provided.]
Lessons Overview
Create-a-State
Students simulate funding a state government with
available natural resources
Renewable Financial Resource
Students learn about investment types and the
importance of diversification
Fund Sustainability Simulation
Students learn the importance and challenge of
managing money keeping future generations in mind
4:34:06 PM
MS. BURGH moved to and narrated slide 9:
[Original punctuation provided.]
Create-A-State:
Essential Question: How do states have money to tun
their government?
What role do natural resources play?
Students simulate funding a state government with
available natural resources and are challenged to
think about how they can transform a nonrenewable
resource into a renewable resource.
Learning Outcomes:
• Students describe how Alaska's government funds its
needs with different revenue streams.
• Students can articulate potential issues with having
a non-diverse revenue stream.
4:36:26 PM
MS. BURGH moved to and narrated slide 10:
[Original punctuation provided.]
The Permanent Fund:
A Renewable Financial Resource
Essential Question: How do the mineral revenues from
Alaska's oil and gas industries provide for Alaskans
today and in the future? What is the Alaska Permanent
Fund? How does Alaska invest the Permanent Fund and
manage it for the long run, as a renewable financial
resource? What are the risks/rewards associated with
investing and why is it important to diversify your
investments?
Students learn about investment types and the
importance of diversification.
Learning Outcomes:
• Students explain how the Fund benefits Alaskans
today and saves money for future generations.
• Students identify who manages and invests the Fund.
• Students can define and give an investment example
of a stock, bond, and real estate.
4:37:37 PM
MS. BURGH moved to and narrated slide 11:
[Original punctuation provided.]
Fund Sustainability Simulation Game
Essential Question: How does the money of the
Permanent Fund get managed and spent?
Students learn the importance and challenge of
managing money keeping future generations in mind.
Learning Outcomes:
• Students practice compromise and long-term planning.
• Students can explain the concept of the POMV
(Percent of Market Value) rule and why it was
enacted.
• Students can describe the Legislative roles and
responsibilities concerning spending.
4:39:38 PM
MS. BURGH moved to and narrated slide 12:
[Original punctuation provided.]
Teacher Resources
Curriculum Workbook
• Full workbook, including lesson plan materials and
activity components to be used in the classroom (or
at home).
Teaching Kit
• Includes workbook as well as all lesson material
manipulatives and print-outs.
Educational Videos
• The curriculum utilizes three videos for students to
watch in the classroom to solidify concepts taught
in each of the three lessons.
4:40:26 PM
SENATOR MYERS asked whether the curriculum addressed the
resource curse," the problems associated with using resources
as the primary government revenue resource.
4:40:44 PM
MS. BURGH said the first lesson, Create A State, initiated the
discussion about the pros and cons of various resources as
revenue sources.
4:40:59 PM
SENATOR CLAMAN asked whether paying a dividend was part of the
function of the model states created in the curriculum.
MS. BURGH affirmed that paying a dividend was included as a
state function.
There was a brief pause to address technical difficulties with
the presentation.
4:41:52 PM
At ease
4:42:14 PM
CHAIR GIESSEL reconvened the meeting.
The presentation continued with an overview video titled: The
Permanent Fund - Alaska's Renewable Revenue | Alaska.
4:46:08 PM
MS. BURGH said Alaska Resource Education (ARE) worked with the
Alaska Permanent Fund Corporation (APFC) to create this and
other videos that were accurate and fun presentations,
simplifying complex topics.
4:46:33 PM
SENATOR WIELECHOWSKI stated that most Alaskans think of the
dividend when they think of the Alaska Permanent Fund. He
observed that the materials presented didn't seem to mention the
dividend.
4:46:55 PM
MS. EDE answered that the APFC intended that the curriculum
would focus on the investment aspect of the fund rather than the
dividend.
4:47:29 PM
MS. BURGH added that the curriculum briefly referenced the
dividend as an accessible entry point, using students'
familiarity with it to introduce and build understanding of the
Alaska Permanent Fund and its purpose.
4:48:04 PM
CHAIR GIESSEL asked whether instructors ever encountered
students who have no idea about the dividend.
4:48:10 PM
MS. BURGH said they did not. She said that most parents
typically had the money, but most students have at least a
semblance of an idea about the dividend.
4:48:26 PM
MS. BURGH moved to and narrated slide 14, explaining that the
Permanent Fund curriculum was integrated with the other elements
of the ARE program:
[Original punctuation provided.]
Curriculum Integration into ARE's Programs
The Alaska Permanent Fund
Alaska's Renewable Revenue:
Rockstars
Our Alaska, Academies of Anchorage
AMPED on ENERGY
Natural Resource Management, Teacher Externship
P.O.W.R.
4:49:36 PM
MS. EDE moved to and narrated slide 15, illustrating the
implementation of the curriculum in 2022:
[Original punctuation provided.]
Implementation of Alaska's
Renewable Revenue Curriculum
675 Students Taught
1,153 Student contact hours
85 Teachers trained
22 Communities
4:50:16 PM
MS. EDE moved to slide 16:
[Original punctuation provided.]
Teacher Testimonials
"The lessons are easy to use and very engaging for
students" 12th grade Economics teacher
"The Renewable Revenue curriculum has been invaluable
to me in the classroom. The materials make this
sometimes-cumbersome topic fun with games and personal
buy-in. The hands-on lessons allow the students to
better understand something that will directly affect
them as Alaskans." 9th grade Alaska Studies teacher
"These lessons are a fun, hands-on way to teach
students about complex topics and make them relevant
to their lives. My students loved them!" 9th grade
Alaska Studies teacher
MS. EDE said the lessons had been well-received by students and
teachers. She appreciated the partnership with the Alaska
Permanent Fund Corporation (APFC) to develop the curriculum.
MS. EDE noted that ARE had developed extensive curriculum on
many resource topics.
4:51:08 PM
MS. EDE concluded by inviting committee members to a lunch and
learn opportunity when ARE would present the extensive
curriculum they had developed and made available across the
state.
4:51:48 PM
SENATOR HUGHES noted her recent experience observing lessons in
a fourth-grade classroom. She enthusiastically described the
high level of student engagement and interest.
4:52:20 PM
SENATOR DUNBAR noted that ARE was a 501 c3 organization. He
asked what their primary revenue resource was. He also asked
whether their curriculum addressed the visitor industry as one
of Alaska's natural resources.
4:52:58 PM
MS. EDE said ARE's revenue sources were a combination of private
funding and corporate funding, grants and fund-raising events.
She emphasized their efforts to maintain a diversity of funding
sources.
MS. EDE said there was not currently curriculum that included
the visitor industry, but that ARE would be interested in
developing it, perhaps in partnership with tourism industry
members of ARE's board.
4:54:19 PM
SENATOR MYERS noted that the prior presentation by the Alaska
Permanent Fund Corporation (APFC) characterized the investment
perspective of the fund to resemble that of a "retired person.
With the perspective in mind that the state was now simply
living off past income generated by the state's resources, he
asked whether the use of the Permanent Fund for government
undermined interest in resource development.
4:54:56 PM
MS. EDE noted that ARE, as a 501c3 educational nonprofit
organization, did not take political positions. However, she
said ARE could develop curriculum to teach about the proposed
change [to the Permanent Fund structure].
4:55:19 PM
CHAIR GIESSEL asked whether ARE would teach through the summer.
She noted that there were efforts to execute a constitutional
amendment resolution [addressing the structure of the Permanent
Fund] to go before the voters in 2026. She advocated for a plan
to educate voters as well as students.
4:55:51 PM
MS. EDE said ARE met with APFC frequently to adapt and update
their goals. She said there were summer programs planned as well
as teacher externships. She emphasized that the videos were
available on both ARE's and APFC's websites for anyone to watch
and she concurred that all Alaskans could benefit from the
material.
4:56:48 PM
CHAIR GIESSEL noted the many new residents in the state and
asked whether ARE waited to be invited to schools or approached
schools [to offer their materials].
4:57:00 PM
MS. BURGH said there was no shortage of interest in ARE's
offerings. She noted that the Permanent Fund curriculum was new
and there had been concerted outreach to get it in classrooms.
She said economic and financial literacy classes were new spaces
for resource education.
4:57:42 PM
CHAIR GIESSEL expressed gratitude for both presentations.
4:58:25 PM
There being no further business to come before the committee,
Chair Giessel adjourned the Senate Resources Standing Committee
meeting at 4:58 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 3.23.25 Permanent Fund Corporation Presentation on Alaska's Renewable Resource Revenue.pdf |
SRES 3/24/2025 3:30:00 PM |
|
| 3.24.25 Alaska Resource Education Presentation for Senate Resource Committee.pdf |
SRES 3/24/2025 3:30:00 PM |