Trustees Look Towards Strategic Planning and Trustees Paper #10

In Uncategorized by Paulyn

The Board of Trustees held a Special Meeting on September 6-7, 2023 to discuss the FY25 budget proposal and upcoming working group initiatives, and an Audit Committee on September 7, 2023 to review the FY23 independent audit report and consider the internal audit functions. The Board also took action to authorize the FY24 budget authority to enter a lease for the Anchorage satellite office.

The directive to open an Anchorage office is part of the Corporation’s 2020-2025 strategic plan and has been publicly discussed in meetings over the past four years. Throughout, the Board has been on record asking for progress on the satellite office. As recruitment and retention have been challenging for many employers, including APFC, considerations have been made to advance and assess tools, including adopting a remote-work policy. Opening an additional office in Anchorage, the state’s largest city will broaden the playing field by providing another option for employees. The Alaska Permanent Fund Corporation’s headquarters will remain in Juneau, our home since 1980.

Given the state’s reliance on the earnings of the Fund to provide more than 50% of the undesignated general fund revenue stream, the Board considered the durability of the Earnings Reserve Account (ERA). Under the current two-account structure, the Principal contains savings that are used for income-producing investments and the Earnings Reserve Account holds the investment income that is available for the legislature to appropriate to support the state’s budget, including essential services and the dividend. The ERA is essentially the checking account of the Fund and it grows through statutory net income which is net realized gains generated through investment activity. Given current market conditions, the amount of income generated through investment activity has decreased compared to previous years. As a result, the spendable portion of the Permanent Fund is being used faster than it is being replenished.

This fall the Board of Trustees is taking on important initiatives to support the ongoing success of the Alaska Permanent Fund Corporation’s investment capabilities, enduring growth of the Permanent Fund as the state’s largest renewable financial resource, and its ability to provide to meet the needs of today’s generation as well as tomorrow’s.

The Special Meeting provided a discussion opportunity and a preliminary vetting of ideas associated with the Board’s long-term strategic planning efforts, the development of Trustee Paper #10, and an overview of the proposed FY25 budget.

  • Strategic Planning – A group of volunteer board members will start working with staff and KMD Services & Consulting to establish long-term goals for the Corporation and the Fund. This work will continue throughout the fall, and the resulting plan will provide a strategy for meeting the established goals, as well as clearly communicating the direction to our stakeholders. It is expected that this item will be included on future Board meeting agendas.
  • Trustees Paper #10 – A group of volunteer board members will work together with Dr. Malan Rietveld to research, write, and publish a policy paper on the Permanent Fund. As contemplated, the paper will include a history of the Fund, an overview of the Fund’s structure, insights into the durability issues under the current construct, and potential solutions to bring the Fund in line with modern endowment practices. As with former Trustee Papers, this study will anchor the history and policy direction for the Alaska Permanent Fund and the Corporation.
  • FY25 Budget Proposal – This budget request acknowledges the importance of APFC’s continuing success as the largest sovereign wealth fund in the US and the 2nd largest per capita globally. Budget resources are essential in ensuring that the Corporation can fulfill our vision of delivering outstanding returns for the benefit of all current and future generations of Alaskans. Accomplishing this vision requires skilled and capable professional staff, discipline in adhering to long-term strategies, and durable resources.

Board Chair Ethan Schutt notes, “As a public corporation, we value the transparency that our open meetings bring to the process of investing on behalf of Alaskans. With that comes the reality that our listeners need to recognize and differentiate between the preliminary discussion of ideas vs. acting to moving forward with an initiative that only happens via board action, that is, a vote.”

The next meeting of the Board of Trustees will be held in Anchorage, Alaska, on September 27 and 28, 2023.