Opinions

Is it time for a more independent Permanent Fund board of trustees?

The Alaska Permanent Fund Corporation (APFC) Board of Trustees voted to dismiss Executive Director Angela Rodell at its Dec. 9 meeting. That decision has raised questions about whether the APFC Board of Trustees is sufficiently insulated from political influence. Alaskans should understand that the APFC board is much less insulated from political influences than is typical of independent regulatory agencies at the federal level.

There does seem to be some agreement that the APFC Board of Trustees should be protected from political influence. For example, the APFC website states: “One of the goals when creating the Corporation was to protect the fund from political influence through the establishment of a six-member Board of Trustees, who serve as fiduciaries.” But simply having a board does not insure independence. That independence depends upon the appointment process for members of the board.

The APFC Board has six members. By statute, one member is the Commissioner of Revenue and a second is the head of another state government department. Department heads are appointed by the governor, approved by the Legislature, and serve at the pleasure of the governor. The other four are public members, appointed by the governor, who serve four-year staggered terms, so one is replaced each year.

The appointments of the public members are not subject to approval by the Legislature. Under the Alaska Constitution, only “principal department heads” and members of “a regulatory or quasi-judicial agency” are subject to legislative approval. The APFC is structured as a state-owned corporation. Individual board members are clearly not department heads. While one might wonder if the “regulatory or quasi-judicial agency” term could be stretched to include the APFC Board, the statutory structure seems to assume that the APFC Board does not fit that second category either. The APFC does not regulate any activity outside the APFC, nor does it make quasi-judicial decisions that affect outside parties. While there is no court decision directly on this question, it seems very likely that a court would agree that supervising the management of the Permanent Fund is not a “regulatory” activity in the constitutional sense.

The federal government has created a large number of agencies that are independent of the Executive branch. Examples include the Securities and Exchange Commission (SEC), the Federal Trade Commission, and the Nuclear Regulatory Commission. The federal government therefore has considerable experience in defining the appointment of independent commissioners and board members. Independent commissions almost always have an odd number of members to avoid tie votes. The most common board size is five or seven members. Terms are almost always an odd number of years, so terms are longer than a single four-year presidential term, and new appointments are made at varying times of the election cycle. The most common term is five or seven years. Many boards have limits on the number from the same party. The SEC illustrates a common appointment process. There are five members, they serve for five years, and no more than three can be from the same political party. All commissioners and board members are nominated by the president and approved by the U.S. Senate.

In comparison to federal agencies, the APFC board is subject to much greater political influence. A new Alaska governor would appoint half of the trustees (the two department heads and one public member) during his or her first year and a clear majority (with the second public member) by the second year. One-third of the trustees, the department heads, report to and serve at the pleasure of the governor. In comparison, a new U.S. president would not have appointed a majority to most federal independent commissions until the third or fourth year of his or her first term. Finally, approval by the U.S. Senate provides a check on presidential authority and also involves a confirmation process whereby appointee qualifications are publicly reviewed.

The Legislature is conducting hearings about the dismissal of the executive director. Its deliberations should address the underlying issue, which is the level of independence of the APFC board. There clearly are alternative structures that provide greater independence. The federal example would suggest having a board of five or seven entirely independent members who serve terms of five or seven years. A restriction that no more than of three of the five (or four of the seven) members could be from the same political party also bears consideration. These changes could be accomplished by amending the statute.

The biggest, and perhaps most obvious, change would be to require approval of appointees by the Alaska Legislature. As noted above, a constitutional amendment would very likely be required to allow legislative approval. Delegates at the Alaska Constitutional Convention could not have foreseen that a Permanent Fund would become central to Alaska state finances. Otherwise, they might have included different language about which board members are subject to legislative approval. If a constitutional amendment to create a percent-of-market-value (POMV) distribution to state government from the Permanent Fund is under consideration, it might be appropriate to also consider requiring legislative approval of APFC trustees.

Ralph Townsend is Professor of Economics at the Institute of Social and Economic Research (ISER) at the University of Alaska Anchorage. ISER faculty has long contributed to understanding economic policy issues in Alaska. George Rogers, who was one of ISER’s founders, was appointed by Gov. Jay Hammond as one of the first six APFC Trustees.

The views expressed here are the writer’s and are not necessarily endorsed by the Anchorage Daily News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)adn.com. Send submissions shorter than 200 words to letters@adn.com or click here to submit via any web browser. Read our full guidelines for letters and commentaries here.

Sponsored