Permanent Fund Corporation and sponsor outline proposed constitutional change to move to a percent‑of‑market‑value payout (HJR 10)

Representative Schrage introduced House Joint Resolution 10, which would place a constitutional amendment on the ballot to change how the Alaska Permanent Fund is treated and how appropriations from it are determined.

Devin Mitchell, chief executive officer and executive director of the Alaska Permanent Fund Corporation (APFC), and Marcus Frampton, APFC chief investment officer, presented the corporation’s rationale for a single‑fund endowment model with a percent‑of‑market‑value (POMV) draw. Mitchell summarized the proposal’s three goals as “respect, protect and provide”: respect the sacrifice of prior generations, protect the fund from one generation taking an outsized share, and provide predictable annual transfers the state relies on for the permanent fund dividend and other general‑fund needs.

Mitchell explained the current two‑account construct: a principal (often reported near $59 billion) and an earnings reserve account (ERA, often shown around $10 billion), yielding a roughly $80 billion total figure. He told members the accounting treatment of unrealized gains creates mismatches between what is accounted as principal and what is actually spendable; for example, the APFC noted approximately $3.7 billion available for a FY‑27 POMV draw and estimated FY‑26 POMV at about $3.8 billion and a FY‑27 projection near $4.0 billion under a 5% draw of a five‑year average market value.

Mitchell and Frampton told the committee the current statutory framework requires realized income to flow into the ERA before it becomes spendable, which can create shortfalls when investment gains are largely unrealized. APFC staff said FY 2025 was the first year since the percent‑of‑market‑value era began in which there was a projected inability to fund the coming year’s POMV transfer under the current construct and described a roughly $400 million shortfall in that context.

Presenters discussed the tradeoffs of a 5% draw: Mitchell said 5% should likely be treated as a maximum draw and that lower draws (4–4.5%) reduce the probability of principal erosion over long horizons; APFC staff noted the trustees view the POMV constitutional change as a structural, durable fix that aligns accounting and investment portfolio practice.

Committee members asked about time‑smoothing, effective draw rates, probabilistic modeling of ERA failure, and whether a single‑fund model would increase the risk of invading principal in a prolonged market downturn. APFC staff replied that either construct could see principal decline in a deep market loss, but the current two‑account model produces mismatches and a higher short‑term risk of failing to fund transfers. APFC and legislative finance modeling were cited as showing a non‑zero probability of ERA failure within the next several years under current practice.

Questions also touched on asset allocation, liquidity needs, private equity exposure and whether a single‑fund model would affect nimbleness. APFC said the investment policy would still need liquid assets to meet cash flow and that a single‑fund system would not, by itself, justify an unconstrained move to illiquid, high‑return investments.

Representative Kerrick set an amendment deadline of 5 p.m. Wednesday, April 30, and the committee set HJR 10 aside for further consideration with a scheduled follow‑up hearing the next week; Mitchell and APFC staff were asked to return for additional modeling and performance discussion.