History

Ten years after Alaska achieved statehood, oil was discovered on the North Slope and the young state was suddenly rich. With the understanding that Alaska’s new oil wealth would not last forever, residents created the Alaska Permanent Fund in 1976 so this non-renewable resource would provide benefits to current and future generations. Four years later, the Alaska Legislature created the Alaska Permanent Fund Corporation to prudently manage the Fund. After more than 40 years of wise management, APFC has grown the Permanent Fund to more than $79.0 billion. Want to know how we did it?

What is the Permanent Fund?

Learn more about how Alaskans successfully worked together to convert the state's non-renewable resources into the state's largest, renewable financial resource for the benefit of generations to come.

Establishing the Fund

Ten years after Alaska achieved statehood, oil was discovered on the coast of Alaska on state land. It was a huge find and when the state held the 1969 North Slope oil and gas lease sale a year later, it brought in $900 million in revenue. While there was a significant amount of debate at the time as to whether some or all of the money from the lease sale should be saved, ultimately the proceeds were used to support infrastructure and social programs throughout the young state.

Governor Hammond speaking with Legislators

1969 Alaska Oil and Gas Lease Sale

Construction of the Trans Alaska Pipeline System

Representative Clark Gruening, APFC Trustee 1995-2003

Valdez Terminal

State Office Building, Juneau

Speaker of the House, Representative Terry Gardiner

In 1974, as construction of the Trans Alaska pipeline began, Alaskans were looking towards the future and deliberating on how to best utilize the anticipated mineral royalties. Many of the state’s decision makers supported putting a portion of the expected revenues into a "permanent fund," where they would be out of reach of day-to-day government spending and could generate income into perpetuity.

Alaska’s Constitution does not allow for dedicated funds, so to direct these oil revenues into a permanent fund, the Constitution had to be amended. Placing the founding language for the fund in the Constitution had the added benefit of helping protect it from being spent by the Legislature without a vote of the people. A Constitutional Amendment requires a majority vote of the people of Alaska and one establishing the Permanent Fund was approved 75,588 to 38,518 in 1976.

Alaska Constitution Article IX, Section 15
Section 15. Alaska Permanent Fund.

At least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law.

Establishment of APFC

On February 28, 1977, the Permanent Fund received its first deposit of dedicated oil revenues totaling $734,000. Investments consisted almost entirely of bonds, while the Legislature had a four-year public discussion regarding whether the Permanent Fund should be managed as an investment fund or as an economic development bank.

Governor Jay Hammond signed a bill in 1980 creating the Alaska Permanent Fund Corporation (APFC) for the purpose of managing investments. One of the goals when creating the Corporation was to protect the fund from political influence through the establishment of a six-member Board of Trustees, who serve as fiduciaries.

APFC’s first Board of Trustees was established with Elmer Rasmuson as Chair, Thomas Williams as Vice-Chair, Wilson Condon, Peter McDowell, George Rogers and Robert Ward as members.

Also in 1980, the Legislature approved the Permanent Fund Dividend program. The first dividend check of $1,000 was distributed two years later.

APFC History

In 1990, APFC celebrated its 10th anniversary with a video about the Fund and a discussion with its early leaders.

In 2010, APFC celebrated its 30th anniversary and created this video highlighting the history of the Fund and the Corporation.

Timeline of the Fund and APFC

Prudhoe Bay Oil & Gas Lease Sale

1974 | Construction of the 800-mile trans-Alaska pipeline begins and lasts 39 months. Costs total $8 billion, including the Marine Terminal in Valdez.

1976 | Alaska voters, by a margin of 75,588 to 38,518, approve a Constitutional Amendment establishing the Permanent Fund.

1977 | On February 28, the Permanent Fund receives its first deposit of dedicated oil revenues totaling $734,000. The Legislature begins four years of public discussions regarding whether the Permanent Fund should be managed as an investment fund or as an economic development bank.

Governor Hammond signs the bill creating APFC.

1980 | The Alaska Legislature passes Senate Bill 161 creating the Alaska Permanent Fund Corporation (APFC) to manage the investments of the Permanent Fund, and places a list of allowed investments into state law. APFC is officially established as a state entity and the Board of Trustees is entrusted with oversight of the Corporation and the fiduciary responsibilities of Fund management. In the photo to the right, Governor Jay Hammond is shown signing the bill creating APFC.

$900 million in surplus oil revenues is deposited in the Permanent Fund by special appropriation. The Legislature

Newspaper clipping -- $900 million deposited into Permanent Fund.

also approves the first Permanent Fund Dividend program. This program is ruled unconstitutional by the United States Supreme Court because individual dividend payments varied based on length of residency.

1982 | The Alaska Legislature, at the request of the Board of Trustees, enacts inflation proofing to protect the Fund’s purchasing power. The first Permanent Fund Dividend check of $1,000 is distributed. The Legislature pays this first dividend, not with Fund income, but with surplus oil revenues.

1983 | Following changes to the statutory investment list, the Fund makes its first investment in the stock market, and later that year, in directly held real estate. APFC is functioning as a strong, viable, and independent organization. For the first time, the Trustees are establishing long-term goals for rates of return and are formally developing an asset allocation policy designed to achieve their goals. Investments are being made in U.S. stock and real estate for the first time as the Corporation grows to ten employees.

1987 | Despite the stock market crash

New York Stock Exchange

in October 1987, the Fund’s performance ranks in the top 9% of all public funds in the U.S. Total annual throughput of oil in the trans-Alaska pipeline peaks at 2 million barrels per day.

1988 | APFC kicks off its Alaska College Internship Program as a way for the Fund to help young Alaskans gain entry into the field of finance and investing.

1989 | APFC increases to 18 employees. The Alaska Legislature grants the Trustees authority to invest in non-U.S. securities. The 7 billionth barrel of oil passes through the trans-Alaska pipeline.

1990 | The Fund begins to invest in stock and bond markets outside the United States.

1991 | On January 1, the 8 billionth barrel of oil arrives in Valdez. From 1991 through 2000, the Permanent Fund earned at least $1 billion in net income each year.

1993 | Fund assets reach $15 billion.

1994-1995 | APFC begins managing another fund: the Alaska Mental Health Trust Fund. By 1995, the Corporation has a sizeable staff of about 30. As the Corporation continues to mature, greater emphasis is placed on insulating the management of the Fund from political influence, while maintaining APFC’s ability to remain responsive to changes in state policy and accountable to Alaskans.

1997 | Surging stock markets drive Fund performance to all-time levels as the Fund grows to more than $22 billion. In a special forum, Alaskans around the state discuss the Fund's future. The Legislature appropriates another $803 million to the Fund's principal.

1998 | For the first time ever, Fund earnings exceed state oil revenues as the Fund reaches the $25 billion mark.

1999 | The Legislature increases the Fund’s investment flexibility to allow up to 5% of the Fund’s value to be invested in alternative investments.

S&P Drop

2000 | The Trustees remain committed to a long-term, diverse investment strategy as the stock market begins a sharp decline that will last for three years. Trustees further diversify the Fund’s investment portfolio and increase the equity allocation to 53%.

2001 | 25th Anniversary The Board of Trustees formally endorses a constitutional amendment to change Fund payouts to a percent of the Fund’s total value (POMV). The first of a series of resolutions that would place this proposed change on a general election ballot are introduced in the Legislature at the Board’s request.

2002 | The Bear market that began in 2000 leads to the Fund’s first negative return in 2002. These market conditions carry through 2003.

2004 | APFC invests in two new asset classes: absolute return strategy funds and private equity. The Legislature changes state law to require cause before any of the four public members of the Board may be removed, furthering the efforts to keep APFC independent.

2005 | The Legislature makes a significant change in how Fund investments are determined by removing the allowed investment list from state law so that Trustees make investment decisions solely under the guidelines of the prudent investor rule.

2006 | The Fund reaches $35 billion in value, an increase of $5 billion from the prior year.

2007 | The Trustees add a new asset class, infrastructure, to the Fund’s investments. Several years of strong returns carry the Fund’s value to $40 billion.

Stock Market Crash of 2008>

2008 | A correction that began in late 2007 causes markets to drop dramatically and makes 2008 one of the five worst years in the 218-year history of the U.S. stock market.

2009 | The Board reorganizes the Fund’s investments into risk-based groups, where investments are grouped by the market condition that those assets are intended to address. This better fits the Board’s goal of building a portfolio that will provide a more stable return under a variety of conditions. Based on this and other innovative risk management activities, APFC receives an international award for innovation.

Board working together.

2012-2013 | Continuing the evolution of the Fund’s investments, the Board works to take advantage of APFC’s growing capabilities. Programs are created to bring international bond and infrastructure co-investments in house.

2014 | Fund assets reach $50 billion.

2015 | The Board amends two sections of APFC’s Investment Policy. One amendment allows staff to seek out any investment that has similar risk and return characteristics as infrastructure, rather than be limited to a rigid focus on traditional infrastructure sectors. The second amendment groups the Fund’s absolute return and real return investments under a single program. Specific amendments to the policy authorize the Fund to be placed in a smaller number of more concentrated investments to help lower investment costs and prevent overdiversification.

2016 | The Fund celebrates its 40th anniversary. FY16 is another volatile year, with continued global market corrections and declines in oil prices. However, APFC and the Fund are able to weather the storms with a diversified asset allocation, allowing significant losses in stocks to be offset set by gains in other asset classes. Oil prices eventually enter a period of relative stability, and the bond market outperforms expectations. The Fund ends FY16 with a value of just under $53 billion.

2017 | The Fund reaches a value of over $60 billion, growth that is attributed to APFC staff generating higher returns through active asset allocation and portfolio management. APFC is named a finalist for “Sovereign Wealth Fund of the Year” in Institutional Investor’s 15th Annual Hedge Fund Industry Awards. This serves as recognition of APFC staff’s stewardship of the Fund and commitment to being world-class investors on a global stage. APFC’s Trustees, Executive Leadership, and Staff implement a 5-year strategic plan, that is forward thinking, adaptable, consistent with APFC’s values, and reflective of stakeholders.

2018-2019 | For the first time in state history, the Legislature adopts a mechanism whereby Fund earnings are used not just to pay dividends, but to also contribute to state government under a percent of market value (POMV) methodology. Under this rules-based framework, the state operating budget for FY19 includes a $2.7 billion POMV draw from the Fund for the payment of dividends and to support government services. The POMV draw is based on a percentage of the average market value of the Fund for the first five of the preceding six fiscal years. The draw is subject to appropriation and is set in statute at 5.25% for Fiscal Years 2019-2021 and 5.0% from Fiscal Year 2022 onward.

In recognition of this transition period, when state revenues from oil development were unlikely to fully fund state revenue needs in the future, as a pivotal time for the Fund and Alaska, the Board of Trustees pass Resolution No. 18-04. This resolution affirms the importance of formulaic management of transfers into and out of the Fund to ensure its sustainability and long-term growth. In addition to the POMV structure, other elements are essential in achieving a balance between current demands on the Fund and the protection of intergenerational value: Adherence, Sustainability, Inflation Proofing, and Real Growth.

The Alaska Permanent Fund continues to grow in global stature and emerges as an integral part of our state’s fiscal future. In FY18, the Fund’s investments gain 10.74% and the Fund ends the year with assets under management totaling $64,894,345,000. The quality and diversity of the portfolio’s investment returns across all asset classes, and the Fund benefits from having a board-authorized investment structure that allowed APFC to identify and respond to targeted opportunities and risks within a shifting global financial landscape.

In FY19, APFC accomplishes significant growth with the support of Alaskans, welcoming 17 new staff and building up internal investment and management capabilities. The investment in staff, systems, and the remodeling of office space to accommodate today’s workflow requirements ensures Alaska has a platform to deliver for the next 40 years the results Alaskans have come to expect.

2020 | The Fund becomes Alaska’s #1 source of unrestricted general fund revenues for the State's budget given the decline in oil prices. The POMV draw from the ERA represents 42% of total General Fund revenues in the FY19 budget, 47% in the FY20 budget, and more than 50% in the FY21 budget.

APFC Board of Trustees release the Trustees’ Paper Volume 9: The Role of Sovereign Wealth Funds in Saving, Stabilization, and Generating Income, sharing best practices of peer funds from Norway to Saudi Arabia, and closer to home from New Mexico to North Dakota. The paper examines frameworks that have resulted in peers flourishing and floundering, and thoughtfully analyzes how Alaska might learn from those experiences.

2021 | The Fund reaches at an all-time-high of $81.9 billion with a record return of 29.73% for the fiscal year. With a 5% POMV draw, the Permanent Fund continues to be Alaska’s primary source of unrestricted general fund revenues, providing $3.1 billion to fund essential State services.

APFC celebrates the 45th anniversary of the establishment of the Alaska Permanent Fund.

AN Alaskan's Guide to the Fund

Alaska is more reliant than ever on the Permanent Fund. The Alaskan's Guide to the Permanent Fund explains the basics on the Alaska Permanent Fund, its history, how APFC manages and invests these assets, and its essential role in Alaska's future.

1980 Trustee Paper 1

Public Investment in Alaska, Essays from the Early 1980s

1989 Trustee Paper 3

The Role of the Permanent Fund in Alaska's Fiscal and Economic Future

1997 Trustee Paper 5

The Early History of the Alaska Permanent Fund

1999 Trustee Paper 6

The Role of the Permanent Fund in Alaska's Future: The Principles and Interests Project

Read all Trustees Papers

In the classroom

We hope that the resources provided here and throughout our website will be useful in helping you teach about the Alaska Permanent Fund and the Corporation that manages and invests these assets for all generations of Alaskans.

This section includes a presentation and three quizzes for secondary level students. We recommend that teachers instruct students to use the web site to research the answers. An Alaskan's Guide to the Permanent Fund is also a valuable resource.

Teachers may wish to download the PowerPoint or quizzes to use their classes. The presentation contains a notes section to help teachers deliver the concepts to their students.