The Permanent Fund: Taking care of Alaska and Alaskans for 45 years

The late Gov. Jay Hammond liked to dream big. He wanted to “transform oil wells pumping oil for a finite period into money wells pumping money for infinity.” His dream came true. Because of the Alaska Permanent Fund, Alaska is now the only state that earns much of its unrestricted general fund revenues from the global economy.

Today, the Alaska Permanent Fund totals more than $80 billion. It’s the largest sovereign wealth fund in the nation, the pride of Alaska — and this month we celebrate its 45th anniversary.

The fund’s roots date to 1968, when oil was discovered at Prudhoe Bay on Alaska’s North Slope. The find was world class — what they call an “elephant” in the industry. The state held a lease sale just months after the discovery, and when the last bid was opened, the new state pocketed nearly $1 billion in bonus bids — enough money in those days to fully fund the state budget for a decade.

But needs were great in our young state, and the money was gone before the first drop of oil entered the trans-Alaska pipeline in 1977. Without a mechanism to save some of this instant wealth, leaders like Hammond believed “politicians would spend every windfall to satisfy insatiable short-term needs and demand, only to find themselves in a world of hurt when oil wealth declined. Such had been the experience of virtually every oil-rich state and nation.”

Hammond, aided by legislative leaders, decided the solution was to put some of the incoming money into a fund that would strengthen the long-term success of the new state and reduce the tax burden on its citizens. This led to a constitutional amendment that Alaskans overwhelmingly passed in 1976 to create the Alaska Permanent Fund. The amendment directed that the fund’s principal “shall only be used for those income-producing investments specifically designated by law” and that all income be “deposited in the general fund unless otherwise provided by law.”

In the 45 years that have followed, realized income from the fund’s investments totals $78.6 billion, and this money has flowed to the Earnings Reserve Account for appropriation. Since its inception, $30.3 billion of fund income has been saved for future generations through inflation-proofing and special deposits to its principal, $11.3 billion remains available for appropriation, and $37 billion has been paid out to current generations, fulfilling the founding vision of intergenerational equity.

Of the $37 billion paid out to current generations, $24.4 billion has gone to individual Alaskans in the form of Permanent Fund dividends, $12.1 billion has been distributed since 2019 to support government services and programs, including the dividend, and $433.8 million has gone to the Alaska Capital Income Fund based on the Amerada Hess settlement.

As the fund has grown, so too has its impact on the state. While the state was long dependent on oil to pay our bills, the fund — through its many billions of dollars in investments — has indirectly but substantially diversified the state’s revenue.

Thanks to 45 years of expert management and a disciplined investment strategy, the fund has matured to meet its founders’ expectations. Capital Finance International named the Alaska Permanent Fund Corp. the Best Sovereign Wealth Fund Investment Team in the Americas for delivering a “stand-out performance.”

“APFC is strengthened by a diverse leadership team and staff that aim to protect principal capital and outperform market benchmarks,” the international business publication wrote. “It forges partnerships with premier external managers to amplify internal investment capacities and broaden the fund’s investment reach.”

The fund’s success also comes from the legislative and executive branches by supporting and protecting it through inflation-proofing and special appropriations to the principal, easing of investment restraints and passing the percent-of-market-value rule to establish a known and manageable withdrawal structure that protects the fund’s long-term value.

Today, Alaskans are proud beneficiaries of a fund that has grown large enough to pay for many of our essential services and programs.

As Elmer Rasmuson, the banker who served as the first trustee chair, put it: “Money may not be everything, but I tell you, having the Permanent Fund gives us all a lot of confidence and determination for the future.”

Chair Craig Richards, Vice-Chair Lucinda Mahoney, Trustee Corri Feige, Trustee William G. Moran, Trustee Steve Rieger and Trustee Ethan Schutt are members of the Alaska Permanent Fund Corp.’s Board of Trustees.

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