Crum secretly abandoned asset allocation model for budget reserve

The latest annual report published by the Alaska Department of Revenue about the Constitutional Budget Reserve is from 2023, with a cover letter from former Commissioner Adam Crum dated March 15, 2024.

If the 2024 report was prepared by March 15, 2025, as required by state law, Crum failed to have it posted on the department website before he quit his state job in July to run for governor.

It will fall to the acting commissioner, Janelle Earls, to clear this up for the public.

It will also fall to her to explain what she has learned about Crum’s decision right before he resigned to sign a $50 million contract that ignores the asset allocation investment philosophy that has been applied to the Constitutional Budget Reserve for years.

The asset allocation for the fund, which contains about $2.9 billion, is to have 100 percent of it invested in cash or cash equivalents.

The state website says that asset allocation for fiscal year 2026, which began July 1, is to keep 100 percent of the CBR assets in cash or instruments that can be quickly turned into cash.

But on July 28, 2025, three days after Gov. Mike Dunleavy announced that Crum would be quitting as of August 8, Crum signed a $50 million “agreement for a subscription in a private equity limited partnership,” Earls wrote to the legislative auditor September 30.

A $50 million private equity limited partnership is not cash or a cash equivalent. It carries more risk and is harder to transfer into immediate cash without taking a loss or an increased risk of loss.

The Dunleavy administration had no business secretly abandoning the asset allocation model for the CBR for an investment that they have kept secret.

One main reason for keeping the CBR entirely in cash is that the Dunleavy administration has no fiscal plan and the governor proposes massive deficits every year that would have to be covered by withdrawing $1 billion or $2 billion from the CBR.

The Legislature has blocked Dunleavy’s deficits, largely by cutting the dividend.

I find it hard to believe that Crum would have abandoned the CBR’s 100 percent cash asset allocation—which has been posted on the revenue department website for a long time, without getting approval from the governor.

Whether the governor knew about this or not, the episode is one more sign of Dunleavy dysfunction.

The failure to inform the public or the Legislature about what project we secretly decided to put $50 million into will lead to intense opposition.

As I wrote here the other day, this may be an attempt by Dunleavy to put $50 million into a project without going through the budget process with the Legislature, without the bother of public hearings and open discussion.

The statement by Sen. Gary Stevens and Rep. Bryce Edgmon about this mess was a good one. The public deserves immediate answers from Dunleavy and candidate Crum.

We need to hear right away on what advance analysis took place on this limited partnership and why the administration opted to keep it secret. A $50 million investment should have come with a detailed report and risks and rewards. Where is it?

The Legislature also needs to adopt checks and balances to keep better tabs on what the revenue commissioner is doing with our money. In our system, all responsibility for the executive branch rests with the governor.

But the job of handling state finances has grown incredibly complex since the Alaska Constitution was written and we need more disclosure, less secrecy and more accountability. State law needs to be changed.

One of the commenters on my last blog post summarized the danger of having too much power concentrated in the hands of a single commissioner, who is free to ignore the advice of investment professionals under current law:

“In practice, this means a politically appointed or otherwise unqualified commissioner can push through controversial or ‘crazy-stupid’ investments, and the staff have little authority to stop it, as they must follow the commissioner's directives or risk losing their positions. This concentration of fiduciary power allows the commissioner to override investment staff recommendations and dictate policy unilaterally.”

Perhaps the best thing about Crum’s action is that it could create the political momentum needed for the Legislature to try to take that dictatorial investment power away from the revenue commissioner. Dunleavy would veto any move in that direction, but it would help focus public attention on a real problem.

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