The Alaska Permanent Fund: From Conception to Maturity · study of fund structure. 1981 Supreme...
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The Alaska The Alaska The Alaska The Alaska Permanent Fund: Permanent Fund: Permanent Fund: Permanent Fund: From Conception From Conception From Conception From Conception to Maturity to Maturity to Maturity to Maturity
Transcript of The Alaska Permanent Fund: From Conception to Maturity · study of fund structure. 1981 Supreme...
The Alaska The Alaska The Alaska The Alaska
Permanent Fund:Permanent Fund:Permanent Fund:Permanent Fund:
From Conception From Conception From Conception From Conception
to Maturityto Maturityto Maturityto Maturity
The Alaska Permanent Fund: From Conception to MaturityThe Alaska Permanent Fund: From Conception to MaturityThe Alaska Permanent Fund: From Conception to MaturityThe Alaska Permanent Fund: From Conception to Maturity
Phases of development
• Conception: Reverberations of Statehood, 1959-1974
• Birth: An Ambiguous Idea, 1975-1976
• Infanthood: Narrowing Choices, 1976-1980
• Childhood: Establishing Traditions, 1980-1982
• Teen age: Gaining Strength, 1982-1990
• Maturity: The Prime Earning Years, 1990-present
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The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Conception: Reverberations of Statehood, 1959-1974
1969
$900 million oil lease
sale
$600*
$400
$200
1959
Alaska becomes a state
1968
Oil found at Prudhoe
Bay
1970
First Permanent
Fund proposals
1975
$900 million nearly
depleted
* State spending, in millions.
1961: $46 million; 1975: $496 million
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Birth: An Ambiguous Idea, 1975-1976
The idea will be trampled to death under the stampeding feet of elected politicians running around looking for money to spend
Everyone says the Legislature is spendthrift, so this idea of a permanent fund looks attractive. But they must elect another Legislature if they want to solve the problem of overspending.
-Senator John Rader, 1976
on their high-living programs.
-Anchorage Times, 1975
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Birth: An Ambiguous Idea, 1975-1976
There are, of course, several other reasons to support the Permanent Fund, but off the top of my head, at the moment, I can only think of 900 million!
- Gov. Jay Hammond, 1976
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Birth: An Ambiguous Idea, 1975-1976
Early (income producing) purposes for the Permanent Fund:
• Susitna Dam
• Knik Arm Crossing
• Development of a new capital city
• Home loans
• Farm, commercial fishing and industrial loans
• Day care centers
• Rainy day savings account
• Economic management: “Alaskan federal reserve”
• Community development projects
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Infanthood: Narrowing Choices, 1976-1980
The Prudent Investor Rule
“The public didn’t want to spend it, but they sure had a lot of ideas about how to invest it. You know, we had one guy, who pops into mind, in Nome or Kotzebue—we had them all over the state—and he said, ‘Well, as long as it makes money, and that includes whorehouses in Nevada, we should do it. But we shouldn’t do something that doesn’t should do it. But we shouldn’t do something that doesn’t make money.’ That was an inartful way of stating the prudent investor rule.”
--Clark Gruening
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Infanthood: Narrowing Choices, 1976-1980
Pipeline Interest rates Oil price
1976
Elmer Rasmuson
recommends prudent
investor rule.
1977
Cowper and
Gruening begin
hearings across Alaska.
1978
Gruening introduces bill to set
up the fund under
prudent investor
rule.
1979
Credit crunch lends
support to Hohman loan fund concept.
1980
Tillion, Malone, Gardiner force trust concept to passage,
$900 million deposit.
Pipeline completed
Interest rates double
Oil price doubles
The Alaska Wonk Test: Name that agency:
ACPE: (15 pts.)
AHFC: (5 pts)
AIDA (AIDEC): (5 pts)
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Infanthood: Narrowing Choices, 1976-1980
The Alphabet Agencies (or “Blockers”)
AIDA (AIDEC): (5 pts)
AMBBA: (20 pts.)
APA (AEA): (10 pts)
ARLF: (20 pts)
ASTF: (10 pts)
CFAB: (15 pts)
Total possible: 100 points
The Alaska Wonk Test: Name that agency:
ACPE: Alaska Commission on Postsecondary Education (15 pts.)
AHFC: Alaska Housing Finance Corporation (5 pts)
AIDA (AIDEC): AK Industrial Development & Export Authority (5 pts)
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Infanthood: Narrowing Choices, 1976-1980
The Alphabet Agencies (or “Blockers”)
AIDA (AIDEC): AK Industrial Development & Export Authority (5 pts)
AMBBA: Alaska Municipal Bond Bank Authority (20 pts.)
APA (AEA): Alaska Power (Energy) Authority (10 pts)
ARLF: Agricultural Revolving Loan Fund (20 pts)
ASTF: Alaska Science & Technology Foundation (10 pts)
CFAB: Alaska Commercial Fishing and Agriculture Bank (15 pts)
Total possible: 100 points
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Infanthood: Narrowing Choices, 1976-1980
1980
Governor Hammond signs the first Permanent Permanent Fund Dividend bill. Hugh Malone is behind Hammond, Fran Ulmer is at far right.
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Infanthood: Narrowing Choices, 1976-1980
Purposes of the dividend in the 1980 legislation
• Reduce transience of Alaska’s population
• Distribute resource wealth to “owners”
• Motivate support for the fund
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Infanthood: Narrowing Choices, 1976-1980
Purposes of the dividend in the 1980 legislation
• Reduce transience of Alaska’s population
• Distribute resource wealth to “owners”
• Incentive for public to protect the fund
Question: If the fund’s only purpose is to distribute wealth, why have an incentive to protect it?
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Childhood: Establishing Traditions, 1980-1982
1980
Rasmuson begins study of fund structure.
1981
Supreme Court hears Zobel Case.
19821982
Inflation proofing passes.
First dividend paid.
Rasmuson resigns to protest board structure, Rose appointed.
State spending, millions
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1979 1980 1981 1982
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Teen age: Gaining Strength, 1982-1990
Elements of the founding management philosophy
• Openness, simplicity and transparency.
• Holding down expectations.
• Conservative investment style.
• Active public communication.
• Political involvement and push-back against legislative interference.
• Willingness to anticipate and respond to market changes.
• Low cost, locally developed talent.
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Teen age: Gaining Strength, 1982-1990
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Maturity: The Prime Earning Years, 1990-present
25,000.0
30,000.0
35,000.0
40,000.0
0.0
5,000.0
10,000.0
15,000.0
20,000.0
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Permanent fund fiscal year-end value, in millions, with present value at right.
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Maturity: The Prime Earning Years, 1990-present
Major attempts at change
1999
Special election on a long-range financial plan
Yes: 16.75%
No: 83.25%
2004
Conference of Alaskans at UAF
Recommendations not adopted
The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: The Alaska Permanent Fund: Conclusion
“In truth the Permanent Fund began, chiefly, with a ‘negative’ goal, to place a chiefly, with a ‘negative’ goal, to place a part of the one-time oil wealth beyond the reach of day-to-day government spending. Since then, Alaskans have taken up the work of defining the ‘positive’ goal of the Permanent Fund.”
Elmer Rasmuson, 2000
