Adapted from The Midnight Sun Memo, a newsletter project from your humble Midnight Sun editor. For everyone who’s been asking about keeping up via email or how to support the work we’ve been doing here, we finally have an answer in this nifty newsletter… which comes with two free editions per week and extras for subscribers (though, as you might have learned from following this blog, the schedule can’t be entirely guaranteed). Sign up now!
Legislators across the political spectrum are demanding answers for last Thursday’s abrupt firing of Alaska Permanent Fund Corporation Executive Director Angela Rodell, whose leadership of the fund over the last six years has seen enormous growth in the fund.
The news spread like wildfire through Alaska’s political world, spawning a load of theories and guesses that would put even the most ardent of covid conspiracists to shame. But perhaps the clearest summation of the responses to the firing was what Rep. Bryce Edgmon, I-Dillingham, told the Anchorage Daily News:
“What the hell is going on?”
Edgmon and several other legislators have since committed to holding hearings over the still-unexplained firing of Rodell, which came in the final minutes of a meeting of the board’s trustees. The five votes in favor of her dismissal all came from appointees of Gov. Mike Dunleavy. The board is chaired by Dunleavy ally Craig Richards, who has since hidden behind personnel claims to avoid questions.
On Friday afternoon, both Edgmon and Sen. Gary Stevens—who both serve as the chair of each chamber’s powerful Rules committees—sent a letter to Richards demanding answers.
“Ms. Rodell’s track record is nothing short of exemplary, she has always been a steadfast professional and did everything within her power to shield the fund from outside political interference,” they wrote. “We strongly believe that the public and legislature deserve and explanation for the action the board took.”
The Legislative Budget and Audit Committee has also signaled plans to hold an investigation.
Rodell had clashed with some of the Dunleavy appointees on the board over a recent proposal to cut investor pay. The proposal was brought forward by Department of Revenue Commissioner Lucinda Mahoney as a way to reflect that the dividend was smaller than the long-ignored statutory formula. Rodell, who has been doggedly committed to growing and maintaining the fund, questioned whether the board wanted to maintain its independence from political influence.
“Should we continue to be building this agency or is it time to put our hands up and go, ‘Maybe it’s time to shrink this. Maybe it’s time to move it over, back to Department of Revenue,” Rodell said at the time, according to a report by KTOO. “And how do we think about that? So, it’s bigger, it’s more philosophical. It’s just trying to understand where we want to go with this organization.”
It looks like we got our answer in her firing.
Of course, the big hitch here is that Rodell and the Alaska Permanent Fund Corporation has no direct say in the size of the dividend. That power has and continues to rest with the Legislature, which has narrowly rejected proposals to overspend the Alaska Permanent Fund.
But the impact of the firing could still be significant.
To the Legislature, Rodell has been a trustable and well-respected source of guidance on managing the fund for the long-term. And while the fund has seen spectacular growth under her leadership—going from $51 billion to $83 billion—she’s fought against sizable overdraws like the kind Gov. Dunleavy and his allies have proposed in order to pay out a large dividend to Alaskans, a key campaign promise that Dunleavy has yet to deliver upon. At a hearing earlier this year, Rodell stressed the need for some thoughtfulness in how the fund is managed for the benefit of Alaskans. It’s a golden goose (or salmon, if you may) and shouldn’t be plucked for short-term reasons.
“I’ve watched this debate now happen year in and year out for 10 years. Yes, I do worry that if we don’t follow a POMV spending rule, it will open floodgates. People are hurting, there’s no question. You walk around this town and you can see the effects of the pandemic on Juneau. It is not the same place you came to a year ago or two years ago by any stretch of the imagination, and yet I wonder what are we creating for ourselves in three, four, five years, in ten years. Do we have a place for your two-year-old or five-year-old to grow up in?” she said at the hearing. “We have to ask ourselves what we do we want Alaska to be not in 10 years but what do we want it to be in ’23, ’24, ’25? The CARES Act money is not going to last for a long time. We have to really be asking ourselves what do we have for ’23, ’24, ’25? And that’s a really hard place to be because it means saying ‘no’ sometimes. I don’t envy you guys at all. I have the easy job in all of this. I get look at markets, I get to invest, things are looking good, we’re at 15% for the fiscal year, and maybe I just made your job that much harder by having those kinds of returns.”
With Rodell gone, the worry now is that politics will invade the Alaska Permanent Fund and it will suddenly be more amenable to being the state’s piggy bank, ready to be cracked open for the whims of Dunleavy.
“I felt blindsided by the firing of Ms. Rodell,” Fairbanks Republican Rep. Bart LeBon, another proponent of managing the fund for future generations, told the Fairbanks Daily News-Miner. “Her firing reeks of political bias and cannot be justified in any reasonable way if the decision is based on actual job performance.”
The same concern was echoed by Sitka Republican Sen. Bert Stedman, who co-chairs the Senate Finance Committee and has led the charge on transferring billions of dollars into the constitutionally protected corpus of the fund, in comments to the Anchorage Daily News.
“There is a lot of concern that this clearly politically related in that the Permanent Fund board is being set up and pushed to become more of a political arm of whoever the sitting governor is,” he said. “And that is something that we have avoided for years and should continue to avoid.”
Why it matters
The Alaska Permanent Fund’s importance to the overall state budget has accelerated with the collapse of oil revenue and it currently funds the majority of the state budget as well as reduced dividends. While lawmakers work on a long-term fiscal plan that would bring certainty to the budget, dividends and other revenues, Gov. Mike Dunleavy has advocated for overspending the fund in service of large dividend payouts heading into his re-election year. While legislators are narrowly split on the issue, they’ve so far resisted such overspending.
The significant concern is that breaking the spending rules on the Alaska Permanent Fund, known as the percent of market value (POMV) draw, won’t be a one-time occurrence and will become the favored avenue for balancing the budget instead of taking harder decisions on the dividend, revenues or service cuts. And because the fund is so heavily reliant on investments and the financial sector, there’s concerns that overdrawing the account could dramatically increase the chance that the spendable portion of the fund could be erased, forcing an all-of-the-above approach to taxes, cuts and dividend reductions.