THE PERMANENT FUND
The Alaska Permanent Fund Corporation (APFC) was created to manage the assets of the Alaska Permanent Fund.
The creation of the Alaska Permanent Fund (Fund) is a remarkable achievement in Alaska’s history, one that reflects foresight and commitment to the well-being and benefit of generations of Alaskans. The Fund holds a distinct place in the culture and economy of Alaska, both as a renewable source of revenue and as a symbol of long-term prosperity. In a state with primarily non-renewable resources, the Fund generates a renewable revenue stream for Alaska.
The Fund was established by Alaskans in an historic 1976 vote that amended the Constitution of the State of Alaska to include the following language - Alaska Constitution Article IX, Section 15
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.
The Constitutional amendment protects the fund deposits by dividing the Fund into two parts: the Principal (non-spendable) and the Earnings Reserve Account (spendable), which are commingled and invested under the same asset allocation.
PRINCIPAL: The Alaska Constitution articulates that the Principal shall only be used for income-producing investments.
Comprised of:
- Royalties — the State Constitution directs that at least 25% of Alaska’s mineral royalties (primarily oil royalties) be deposited into the Principal.
- Unrealized Capital Gains/Losses — cumulative gain (or loss) on assets from the time they are purchased to present.
- Inflation Proofing — transfers from the Earnings Reserve Account to the Principal based on statutory calculation and subject to legislative appropriation.
- Special Legislative Appropriations — either from the Earnings Reserve Account or another source, such as the General Fund.
THE EARNINGS RESERVE ACCOUNT: Established in the Alaska State Statutes, the Earnings Reserve Account is available for appropriation. Decisions about uses of the Earnings Reserve Account are made each year by the people’s elected representatives – the Alaska State Legislature and the Governor. To date, the primary use of the Earnings Reserve Account has been to pay an annual dividend to the citizens of Alaska.
Comprised of:
- Operating Income — inflows such as stock dividends, bond interest, and real estate rental fees are deposited into the Earnings Reserve Account.
- Realized Capital Gains/Losses — gain (or loss) on assets from the time they are purchased until the date that they are sold.
- Unrealized Capital Gains/Losses — gain (or loss) on assets from the time they are purchased to present.