$50 million state investment from CBR in illiquid long-term asset sets off alarm bells
Legislative leaders have confirmed some key details of reporting about a $50 million long-term investment by the Department of Revenue with money from the Constitutional Budget Reserve that should be kept in short-term investments because it could soon be needed to pay for state operations.
On July 28, three days after Revenue Commissioner Adam Crum resigned, with an effective date of August 8, he agreed to move $50 million into a “subscription in a private equity limited partnership,” according to the state revenue department.
The governor needs to immediately reveal the full details of this limited partnership, which have been kept from the public. Among the big questions are whether Dunleavy signed off on this plan and whether this is another attempt to push a capital project forward with no public review and no legislative involvement.
We know it is not a short-term investment.
It was inappropriate for Crum to do this as a short-timer. It was inappropriate for Crum to do this with short-term money. It was financial mismanagement, reflecting abysmal judgment.
That Crum, who was a trustee of the Permanent Fund on that date, did this without informing the public should be enough to end his campaign for governor.
Here’s why.
Dunleavy has no fiscal plan and the money in the Constitutional Budget Reserve may be needed to balance the budget at any time.
Dunleavy has repeatedly proposed using the CBR to cover budget deficits, but the Legislature has stopped him, mainly by cutting the size of the dividend.
The $50 million went to DigitalBridge, a company that was invited to Gov. Mike Dunleavy’s latest so-called “sustainable energy conference” last spring and gave a presentation, according to a report by the Alaska Landmine.
“Severin White from DigitalBridge joined Jake Corley to outline the opportunity for Alaska—and investors—at the intersection of energy, AI, and the digital infrastructure that is the backbone of an increasingly digital economy,” the company said on social media after the conference.
“The Great State of Alaska will have a role to play here given their abundant natural resources and history of responsible development,” the company said.
Here is the full statement Friday from Senate President Gary Stevens and House Speaker Bryce Edgmon:
Kodiak, AK - Today, Senate President Gary Stevens (R-Kodiak) and House Speaker Bryce Edgmon (I-Dillingham) issued the following statement regarding media reports of a $50 million commitment from the Constitutional Budget Reserve (CBR) to an outside private equity firm:
"We were caught off guard in a call with the Governor to learn that $50 million from the state’s primary savings account had been committed to an Outside investment firm without legislative or public awareness. We then learned more details of this action in subsequent reporting.
"The CBR was created to provide stability during times of deficit and emergency, ensuring that schools, public safety, and essential services remain funded when state revenues fall short.
"Placing tens of millions of dollars into an illiquid, high-risk investment undermines that purpose and raises serious concerns about accountability, transparency, and fiscal responsibility. Future high risk investments of this nature should not occur without the involvement of the Legislature. Regardless of whether the action was technically permissible under statute, decisions of this magnitude must not occur outside the view of the Legislature or the public.
"The Legislature is actively reviewing the circumstances of this commitment and its implications for Alaska’s finances. We will be consulting with legal counsel and legislative auditors and will consider additional steps, including hearings, to ensure full transparency and to protect our savings for Alaska’s future generations."
The Alaska Landmine reported that Crum signed off on the $50 million to DigitalBridge shortly before he quit his state job to run for governor this summer.
“Surprisingly, officials in the Department of Revenue were unaware of the contract, and only became aware of it when DigitalBridge contacted them with a $50 million cash call. This occurred after Crum had resigned,” wrote Jeff Landfield, citing three anonymous sources.
I had been concerned that Crum would move state money into a private fund that he said he helped set up some months ago called the Frontier Economic Fund. This doesn’t appear to be connected to that dubious venture.
The fund that Crum helped set up reports that it has only has $2.5 million in net assets, so I don’t believe that the state has invested public money in the enterprise.
Crum was supposed to have been part of a closing bell ceremony at the New York Stock Exchange, but he did not appear in the photos for some reason.
I wrote this on June 26:
Alaska Revenue Commissioner Adam Crum still doesn’t understand his duties as a state employee responsible for overseeing vast sums of public money.
If he did, he wouldn’t be attaching the name and influence of the state Department of Revenue to a private investment fund, the latter promoted by a guy who lavishes praise on Crum as a rising star among the nation’s financial wizards.
Here is the press release in which Crum crosses an important line, oblivious to the appearance it creates of state interference with private enterprise.
Gov. Mike Dunleavy, Crum’s boss, must be oblivious as well.
“Today, Alaska Commissioner of Revenue Adam Crum, in partnership with Prospr Aligned, announced the launch of The Frontier Economic Fund (NYSE: AKAF), a new investment vehicle focused on companies driving sustainable growth, local job creation, and long-term investment across Alaska.”
“There’s a real alignment happening between Alaska’s strengths and the country’s needs,” Crum said in the press release. “This fund creates a bridge between that momentum and people who want to support it.”
Part of the problem here is that executives of Prospr Aligned and Vident Asset Management, companies involved in this fund, lobbied the state to participate in this venture and registered as lobbyists in Juneau this year.
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