One of Permament Fund founders calls for 'continuous improvement'

When fisherman Terry Gardiner won election to the state House in 1972 he was 22 years old, the youngest person ever elected to the Alaska Legislature.

One of his earliest attempts to bring change to the Legislature was a resolution in early 1973 to ban smoking in the state House.

House Speaker Tom Fink killed the measure by assigning it to eight of nine standing committees, then he lit up his pipe and blew a big puff of smoke from his legislative perch.

“I’d object but I can’t see you through all that smoke,” Gardiner told him, the Associated Press reported at the time.

It would be many years before the wisdom of banning smoking in public buildings caught on, but Gardiner was always a quick study and a leader. He became the youngest speaker of the House in 1979.

In the debates over the Permanent Fund in 1975 and 1976, he was among those at the forefront, along with Jay Hammond, Hugh Malone, Clark Gruening, Clem Tillion and others.

“People all over the state, including those of us in the Legislature and administration are asking the same question,” Gardiner wrote in a letter to Alaska newspapers in April 1975. “What happened to the $900 million from Prudhoe Bay?”

The question was part of every campaign for every state office from the early 1970s on. And the answer was complicated because the money went into education, roads, public works, public health, loan programs, and $18 million was invested in the stock market.

The Hammond administration sold the stock market investment during a prolonged bear market. It was a bad time to sell, but there was incessant bad publicity and pressure from politicians who repeated the rallying cry—-”What happened to the $900 million?”

The experience with the $900 million led to countless arguments about whether it had been wasted or used to provide important public services that the state could not afford. Here was Hammond’s take in 1975.

All that everyone knew was that the money was gone. This disappearance was a key factor in building public support to save money from future windfalls, which is how the Permanent Fund came into existence, overwhelmingly approved by voters in 1976.

Gardiner, who went on to have a long career in fishing, business and public policy, is one of the few remaining founders of the Permanent Fund alive today.

I asked about his thoughts on the Permanent Fund at 50.

He wrote me that he is a big believer in the “continuous improvement process” that many organizations employ and that “If you don’t measure it, you can’t change it.”

“The Permanent Fund and the Permanent Fund management structure we created was our best effort.  We had one failed model to go on, the Alberta Heritage Savings Trust Fund. We did our best, but it wasn’t perfect,” he said.

The Alberta Heritage Trust Fund, also started in 1976, now contains about $25 billion, while the Alaska Permanent Fund has about $86 billion.

The world changes in 50 years.

“Now the Permanent Fund is more critical than ever to the economy and people of Alaska.  Alaska cannot afford any mistakes,” he said.

“These are among the many reasons that the Legislature should do a very deep and comprehensive review to make sure the general success of the last 50 years happens for the next 50 years.  And I would agree there should be ongoing reviews by the Legislature and not gaps of decades of the PF board and staff being the only review,” he wrote.

There are many sovereign wealth funds today and more models to look at, which means more systems that could be investigated to look for best practices. 

“Norway would be the first place I would start.  I have been going to Norway for the last 25 years since my oldest daughter moved there. I have observed their approach to many areas of government and the economy and have been impressed.”

Norway’s fund, which is now worth about $2 trillion, with about 70 percent of its value invested in companies listed on regulated stock exchanges.

Gardiner submitted what I thought was an important comment at the Alaska Common Ground Permanent Fund online discussion Tuesday night.

“Nationally we have learned that many aspects of government are ‘norms’ and not actually required by law,” he wrote. “For example, Alaska has been very lucky that no governor has used his appointment powers and two commissioners (on the Permanent Fund board) to steer the PF in the wrong direction. Transparency, more legislative oversight and other options should be examined to strengthen the ‘norms,’” he said.

There was another important comment from former Lt. Gov. Fran Ulmer, who was a legislative assistant and then director of Policy Development and Planning for Hammond during the Permanent Fund debates.

She responded to a comment about the 1976 consensus that keeping money from being spent on immediate needs was the reason for its wide support.

It’s true that the public unrest about “What happened to the $900 million?” drove many people to try to prevent a repeat from the next big windfall. But that wasn’t the full picture.

She said there was also a strong belief that saving something from nonrenewable resources was crucial so that there would be a stream of income when the oil ran out. Many people believed that the Prudhoe Bay oil field would not last beyond 2000.

I know that’s why I voted for the Permanent Fund when it was on the ballot in November 1976. It was approved by a two-to-one margin because it was universally popular. The approval had nothing to do with the Permanent Fund Dividend, which had yet to see the light of day.

There was almost no talk of a dividend in 1976. It wasn’t until after the 1979 Iranian revolution—and the Alaska windfall from higher oil prices that no one had expected—that the concept of sending checks to people began to gain some traction.

I will post a link to the recording of the 90-minute session here when it is available.

And finally about Tom Fink, who puffed on his pipe after Gardiner’s attempt to end smoke-filled rooms. The future Anchorage mayor resigned from the Legislature in 1975 because he refused to release the names of his insurance clients after new disclosure rules became law.

Fink wrote the statement in the 1976 voter pamphlet opposing creation of the Permanent Fund. He said it sounded good to save money from nonrenewable resources for the future.

“I suggest it would be more meritorious, however, to give future generations adequate school buildings, adequate roads, adequate docks, and not give them a huge pile of cash and an onerous bonded indebtedness,” Fink wrote.

Fink was wrong about smoking and the Permanent Fund.

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