During construction of the Trans-Alaska Pipeline in the 1970's, oil companies flooded state coffers with money paid for leases to explore and secure drilling rights. The Legislature spent all $900 million of that initial lease money within a few years. Alaskans realized that they were about to receive a great deal more money from oil when the pipeline was complete. They wished to better safeguard the robust income forthcoming from the pipeline, but the state constitution did not allow for dedicated funds. So Alaskans voted in 1976 to amend the constitution to put at least 25% of the oil money into a dedicated fund: the Permanent Fund. This would save money for future generations, which would no longer have oil as a source of income. In 1976 Governor Hammond proposed a constitutional amendment to create the Fund. The 9th Alaska Legislature modified the governor's legislation and placed it as a ballot proposition in the 1976 General Election. It passed by a margin of two to one.
The 1976 state law establishing the Permanent Fund (AS 37.13), states that the Fund was created:
The Board’s goal is to achieve an average annual real rate of return of five percent (5%) at risk levels broadly consistent with large public and private funds. In order to meet this goal, the Board sets an asset allocation that includes holdings across a broad range of investments. Information regarding the Fund’s current investments can be found in the Investments section of this site.
The current value of the Permanent Fund can be found on this site's home page where it is updated daily. The value can fluctuate up or down with market movements, but trends upward over time. In the U.S., the Fund is larger than any endowment fund, private foundation, or union pension trust.
The Legislature decides how Fund income is used. To date, the Legislature has:
Stocks are the most volatile asset class and are high risk in the short run. But for long-run investors like the Permanent Fund, there's actually a greater risk to be out of the stock market than to be in it. The long-term trend of stock prices is more steeply upward than that of other asset classes. Stocks advance in 6 out of every 10 years, in 72% of all 5-year periods and in 77% of all 10-year periods. One study looked at the 62-year period from 1926 through 1987. It showed that if an investor had been out of the stock market only during the 50 best market months (which would be only 7% of the total months in the 744-month time span), total return for the 62 years would have been zero, rather than more than 10% compounded annually had she stayed the duration. The Fund is now also invested in alternative investments, including private equities, hedge funds and public infrastructure. Gradual exposure to these classes will be in keeping with how the Fund has started out in stocks...dedicating just a small percentage of the Fund's total value as Trustees gain knowledge and experience investing in a new asset class.
Yes. The Alaska Constitution states that the Fund's principal cannot be spent. The dividend can only be paid from Fund earnings. If the earnings reserve is zero or negative on June 30, no money can be paid out. APFC Trustees are proposing a better method for determining Fund annual payout that would require a change to the constitution through a vote of the people. The Percent of Market Value (POMV) payout method would remove the distinction between principal and earnings, treating the Permanent Fund as one pot of money. Five percent of the Fund's total market value could be paid out each year.
The Fund is doing well, and over the years has paid out more in dividends than it has taken in from mineral deposits while maintaining a healthy balance. Current, detailed information on the Fund's performance by asset class and overall can be found in the Monthly Performance Reports and Annual Reports that are posted in the Publications section of this site.