Rasmuson's Permanent Fund management vision should not be forgotten
(I hope you will join me at an online presentation and panel discussion March 31 about key issues regarding the future of the Alaska Permanent Fund, organized by Alaska Common Ground, a nonpartisan group that focuses on Alaska public policy.
The evening is to begin with an overview by veteran Alaska attorney and former Rep. Cliff Groh on the structure and governance of the fund.
A panel discussion, with questions from the online audience, will follow. The other panelists are former Senate President Rick Halford, who served in the Legislature for more than 20 years, and former Attorney General Craig Richards, a former trustee of the Permanent Fund and a longtime Alaska lawyer.)
Launching Permanent Fund management
On September 12, 1980, the six men chosen by Gov. Jay Hammond to lead the Alaska Permanent Fund Corporation, under a plan approved by the Legislature, chose Anchorage banker Rasmuson as chairman.
The other five of the first trustees were economist George Rogers, economist Peter McDowell, State Revenue Commissioner Tom Williams, Attorney General Wilson Condon and Transportation Commissioner Bob Ward.
Williams, Condon and Ward were part of Gov. Jay Hammond’s cabinet, while Rasmuson, Rogers and McDowell represented the public. The fund was already close to $1 billion, largely because of a special appropriation by the Legislature of $900 million.
In a speech Rasmuson gave at the annual APFC meeting in 1993, he said the group spent much of that first year studying ways to develop the best structure and mix of investments for the corporation. His speech was included as part of Trustee Paper No. 5 and is worth reading in full.
In setting up the corporation, the Legislature mandated that the fund be “managed by the board of trustees.”
As Rasmuson said nearly 35 years ago, there is an “double-ended elusiveness about the meaning of the term ‘manage,’” that created uncertainty about the role of the trustees and how they related to the governor and the Legislature.
Rasmuson and others wanted to nudge the institution away from direct gubernatorial control by having only one cabinet member—the head of the revenue department—serve as a trustee, instead of three. But the Legislature decided to keep two cabinet members on the board, the arrangement that continues to this day.
“The question of compensation to the public members proved an even thornier issue and one that I believe is of continuous and substantive importance to the management and preservation of the fund,” Rasmuson said in 1993.
Rasmuson wanted to pay board members an annual salary, not the $400 paid to them for each day they met, a fee that has been unchanged for nearly 45 years. He said it was not logical to assume that the work of the trustees was performed only at meetings.
“You can’t run a fund that way,” Rasmuson told legislators in April 1982. He said the pay for trustees should be about the same as that of legislators, who then made about $18,000 a year.
He said the pay would not be so large as to make it a political prize, but enough “to demand the commitment and time of qualified trustees.”
Rasmuson said that serving as a board member would require from one-quarter to one-half of a trustee’s time and that he believed “strongly that in this practical world you get what you pay for.”
Galena Sen. John Sackett removed the language to pay trustees a salary and the Legislature let the matter drop.
By 1993 Rasmuson had been gone from the board for a decade, but he still believed that the trustees had to be paid for their work.
He said that when he declined an offer from Hammond to keep serving as a trustee, he told the governor that he did not have the time with his bank work and other duties.
“I am also persuaded that the board should be heavily involved in operational decisions,” he wrote Hammond. “Unfortunately, the Legislature, by failing to provide for adequate compensation to the public members, does not recognize the necessity of trustee participation. I would not feel comfortable with the prospects of relegating the future operations and destiny of the fund to the staff.”
The operations and destiny of the fund have long since been relegated to the staff. The mix of investments has become far more complex, but this is the time for a new look at what we should expect from the trustees of the fund. I think the board needs to be expanded. The work has to be recognized as a far more difficult task than is reflected in paying people $400 for each public meeting day.
I think it is not responsible to continue a system in which the trustees are essentially volunteers.
Rasmuson said in 1993 that “the greatest expanded service that the Board of Trustees could render all Alaskans would be to take on the conceptual leadership for the financial policies of the state. We certainly need this leadership, and who else is going to do it? Any governor or legislator, regardless of party, is focused on spending, operations and the writing of law.”
“Actually this this enlarged role for the trustees involves more a concept of responsibility rather than any additional duties. I offer as a model the various boards of the Federal Reserve Banking System,” he said.
On this the 50th anniversary year of the fund’s approval by Alaska voters, I will note here that Rasmuson’s vision of an expanded role for the trustees has been entirely forgotten.
But it deserves new attention by the Legislature, the next governor and all Alaskans who care about our future.
A system created when the fund was of little importance in the big scheme of things has continued largely without examination or review. It’s time to think about how the management structure of a fund that could soon surpass $100 billion needs to be updated to reflect the needs of Alaska today and tomorrow.
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