News-Miner opinion: For nearly half a century, the Alaska Permanent Fund has been a bedrock of the state’s economy, ensuring that the state’s oil wealth benefits both present and future generations. However, the fund now faces an uncertain future. Without significant reform, the Earnings Reserve Account (ERA) may not be able to support both the Permanent Fund dividend (PFD) and state expenditures in the coming years. The solution is clear: It is time to transition to a rules-based, endowment-style management approach to protect the fund’s sustainability and secure Alaska’s economic future.
The Alaska Permanent Fund was established in 1976 as a long-term savings mechanism, investing a portion of the state’s oil revenues for future use. The fund consists of two key components: the principal, which is constitutionally protected and cannot be spent, and the ERA, which is used to pay dividends and support state spending. While the fund itself has grown to over $70 billion, the ERA remains vulnerable, as legislators can appropriate funds from it without a structured withdrawal policy.
Recent projections indicate a nearly 50% chance that the ERA could be depleted at least once in the next decade. This scenario threatens not only the PFD but also state programs that rely on fund earnings. The current system, which allows withdrawals to fluctuate based on political decisions rather than sound financial planning, exposes the fund to significant risk. We need a structured, sustainable approach to managing Alaska’s most valuable financial asset.
A rules-based endowment model, similar to those used by major universities and charitable organizations, offers the best path forward. This approach would implement a percent of market value (POMV) system, in which a fixed percentage of the fund’s total market value is withdrawn annually. By stabilizing withdrawals and limiting spending to a predictable percentage, we can ensure that the fund remains a reliable source of revenue for generations to come.
Moving to an endowment-style model would provide three critical benefits. First, it would protect the fund’s principal, ensuring that the state’s oil wealth continues to generate returns indefinitely. Second, it would provide fiscal stability, eliminating the year-to-year uncertainty that currently plagues state budgeting and dividend calculations. Finally, it would shield the fund from political manipulation, ensuring that decisions about withdrawals are guided by sound economic principles rather than short-term political pressures.
The Alaska Permanent Fund Corporation’s Board of Trustees has strongly advocated for such reforms, recognizing the urgent need for a rules-based framework. Critics may argue that such a transition would limit legislative flexibility, but the alternative — continued ad-hoc withdrawals and the potential depletion of the ERA — is far more dangerous. Without reform, Alaskans could face an era of unpredictable PFDs, unstable state funding and a weakened financial foundation for the future.
Lawmakers are considering sending this change to voters in 2026. If approved, the changes would be enshrined in the Constitution and prevent the Legislature from sidestepping rules with a simple majority and risk overdrawing the fund.
Alaska’s wealth is not infinite, but smart management can ensure it lasts. By adopting a rules-based, endowment-style model, we can protect the Permanent Fund, stabilize the state’s economy, and guarantee that future generations of Alaskans continue to benefit from our state’s natural resources.
