JUNEAU -- The Alaska Permanent Fund Corporation is in the process of hiring a new executive director, at a time when state leaders are increasingly looking to the fund for ways out of an expected multi-year budget crisis.
Questions about how that will affect the $52 billion fund came as the fund's board of trustees met at their capital headquarters Wednesday for a full day interviewing in public and reviewing behind closed doors four finalists for the job of executive director.
Eventual decisions about if and how to use the state savings account will not be made by the fund's leaders or managers, but will instead be made by Gov. Bill Walker, the Alaska Legislature, and Alaskans themselves. Still, the candidates were peppered with questions about the new role the fund is likely to play in financing state government.
The candidates are:
- Angela Rodell, a former commissioner of the Department of Revenue under former Gov. Sean Parnell. She also worked as an investment banker for First Southwest in New York.
- Brian Rogers, former chancellor of the University of Alaska Fairbanks and former Democratic state legislator.
- Alexander Slivka, director of institutional marketing at McKinley Capital Management in Anchorage.
- Glenn Cipriano of Anchorage, former chief executive officer for Alaska USA Trust Company, a subsidiary of the Alaska USA federal credit union.
The candidates will have big shoes to fill, which was often mentioned during the interviews. The new executive director will replace Mike Burns, who led the state-owned, independently managed corporation through years of growth, winning approval for new investment strategies, and providing steady leadership during economic and market turmoil.
Rodell, who a year ago was a member of the board making the hiring decision, has since been hired as a consultant by the Alaska Legislature. While she was hired by a Republican-led majority caucus in the Senate, she assured trustees she could work with all legislators.
"I think I have a very good relationship with legislators on both sides of the aisle, majority caucus and minority caucus," she said.
But trustees expressed concern that if the state becomes reliant on Permanent Fund earnings to balance each year's budget, they could become fearful of the public reaction to losses, which they called "headline risk." Such caution might prompt the fund's managers to take less risk, and as a result bring in less revenue for the state.
"We can't be scared of headline risk, it can't be an issue for us, we have to do what is right," she said.
The Permanent Fund suffered big losses when stock markets began declining in 2008, but held steady and recovered, she said.
"There are going to be losses, that's the nature of the beast," Rodell said.
Rogers told the trustees that he well understood the role the Permanent Fund plays in Alaska, having begun working on issues related to its creation as a legislative aide in the 1970s.
But now, he said, there's an increasing realization that the time has come to deal with a budget crisis, which was the intent for the fund.
"Permanent Fund income is going to be looked to as one of the primary resources to address that issue," he said.
But those questions aren't what is going to be important for the fund's managers.
"Ultimately, the corporation's job isn't to decide what to do with the income, the corporation's job is the stewardship of the principal," Rogers said.
Slivka told the trustees that he could communicate the fund's message, whatever policies were set by the board, to the public without getting involved in partisanship.
"I am apolitical, neither Democrat nor Republican," he said.
Slivka, too, was confident that the Permanent Fund will be looked to for state funding, but said as executive director he'd be implementing decisions of others, not creating policy himself.
"If we can be part of a solution, great, but that's not really the way the job is laid out," he said.
A big change for the Permanent Fund could come if it is required to shift from its current very long term investment horizon to having to produce a set amount of revenue each year for the state.
He said it would be important to keep the public informed about the Permanent Fund's operations so they knew why risks were being taken, and the benefits that could come from somewhat riskier investments..
"There's always going to be volatility, but transparency with the public keeps the negative reaction to down years to a minimum," he said.
Cipriano urged the trustees against risk, however, and said they should consider hedging against it, or taking investment strategies to reduce risk, even if they might limit returns.
"Right now most of your volatility comes from your public stock portfolio, you should look at some hedging strategy," he said.
Jay Willoughby, the fund's recently departed chief investment officer, supported such a strategy, he said.
If the fund has to provide not just a fluctuating dividend but steady revenue for government operations, it will have to avoid losses, he said.
Rather than working to educate the public about volatility, the Permanent Fund should operate more conservatively, more like a savings account, he said.
All of the candidates for the position said they'd move to Juneau, except for Rodell, who already lives in Juneau.
Rogers offered one surprise in his interview, saying he is currently helping his 87-year-old mother move, and would prefer not to begin the job until January.
The delay in the starting date could set back the process of replacing Willoughby as chief investment officer, a Permanent Fund staff member who may be more important than the executive director, and is usually paid more.
Trustees adjourned their meeting in Juneau on Wednesday without saying when they expected to make a final decision on the executive director position.