A national report said other states can learn from the example of the Alaska Permanent Fund as they seek to grow their own funds built from natural resource extraction.
The Pew Charitable Trusts focused on seven states that have funds from extraction revenue, which the report describes as “sovereign wealth funds.” According to Pew, Alaska is one of only two state funds whose purpose is well-defined by state law. And the report found that it’s one of three states that doesn’t allow withdrawals from the fund principal.
Brenna Erford helped write the report and manages Pew’s work on state budget policy.
She praised the foresight Alaska officials and voters had when they established the fund in 1976.
“It’s an outstanding example of a government that had the opportunity to establish one of these funds when the oil industry in Alaska was really just starting up – at least starting up in earnest,” after the Prudhoe Bay oil discovery, she said.
Erford praised Alaska’s history of inflation-proofing the fund, and the fact that the Alaska Permanent Fund Corp. board and managers are somewhat protected from political pressures. She noted that the public board meetings and open financial records are more transparent than the operations of sovereign wealth funds in other countries.
The report doesn’t make recommendations on whether states like Alaska should draw from their funds’ earnings to support annual government budgets. Erford noted Gov. Bill Walker’s plan to use fund earnings for the budget would be within the legislature’s legal mandate.
“I think that the question for Alaskans is, what do they think the future – in terms of natural resources and the Alaskan economy – what does that look like?” Erford said.
Erford said whether to draw from fund earnings depends on whether Alaskans believe oil and gas revenue will stay low or will increase.
The other states with funds are Montana, New Mexico, North Dakota, Utah, Wyoming and West Virginia. In June 2015, the Alaska Permanent Fund had nearly $53 billion, while the other six funds held $16 billion combined.
The report is part of a broader effort by Pew to help states address the volatility that comes from various sources of state revenue, including volatile energy prices.