Angela Rodell defends the Alaska Permanent Fund. And she’s worried.

The Alaska Permanent Fund generates most of the state government's income and is our main hope to balance the annual budget. But the person running the fund has been told to invest as if the money will never be spent.

Angela Rodell, CEO and executive director of the Alaska Permanent Fund Corp. for the past year, said the fund's strategy is based on long-term returns, with investments often chosen for gain in five or even 10 years, not for short-term income.

Long-term investments produce higher returns, but only over that period of time. Short-term investments to stably cover annual expenses earn much less. But many Juneau policymakers seem to expect to have it both ways: to use the fund's earnings for short-term purposes while still getting long-term profits.

That's not the only problem Rodell sees. If things go really badly — if the state doesn't bridge its huge annual deficits within a few years — then the fund could come under intense pressure to sell investments to produce fast cash. At that point, the Permanent Fund, as we know it, would die.

We think of our fund as containing $55.6 billion in permanent savings, but almost 30 percent of that amount is vulnerable to spending. If that happens, investing the remaining 70 percent for stable annual income (rather than long-term growth), would generate only 1 to 2 percent, too little to pay a dividend or to fund much of the deficit.

In our desperation for golden eggs, we've forgotten about caring for the goose that lays them. For example, Rodell had to fight to give her people merit raises, even though they work in a high-paid industry and make decisions affecting billions of dollars.

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The fund has reduced contracts with Wall Street banks and moved the work in-house, saving many millions and adding good jobs to the Alaska economy. But the state makes it hard to hold top employees.

In May, facing a government shutdown due to legislative inaction, Rodell had to warn her staff they might be sent home without pay. She arranged for Bank of New York Mellon to be caretaker of the fund in case the Juneau office went dark.

Amid this tangle of contradictory expectations and budget crises, Rodell stands for reason and professionalism. Her position makes her one of Alaska's most important people.

Rodell's respected predecessors helped create a mythic sense of invulnerability at the fund. But none handled problems as tough as she faces. Surprisingly, however, this isn't the first time she has helped Alaska through a similar situation.

Rodell grew up in the Midwest and studied for a career in public service at the University of Kentucky.

She worked on complex home finance projects at the Kentucky Housing Authority. Seeing nowhere to advance at the state level, she accepted an offer from "the dark side," as she put it, a Wall Street investment bank.

Her New York job brought Rodell's skills to Alaska, as a banker and consultant for Dan Fauske, director of the Alaska Housing Finance Corp. In the 1990s, with oil prices low and the treasury empty, legislators looked to AHFC's assets as an easy source of cash.

With Rodell as part of his team, Fauske fought back, crafting a compromise to give the Legislature a dividend from AHFC based on a set formula.

"Something more reasonable than just whatever anybody decided to grab in a Senate Finance hearing," Fauske said. "Once you break that barrier, the sky's the limit. Then it just becomes a grab bag."

Fauske's legendary skill in working the Legislature probably made the difference, but Rodell learned from the experience, and fell in love with Alaska along the way. (Fauske retired from state service last year and is currently in treatment for lung cancer.)

After the 2008 financial crisis, Rodell was ready to leave New York. In 2011, she accepted an offer from Bryan Butcher, a former lieutenant of Fauske, to join the Alaska Department of Revenue. When Butcher left as revenue commissioner in 2013, she took the job.

She enjoyed the move from Manhattan to Juneau, but running a state department was sometimes frustrating.

Government workers are punished for mistakes but are not rewarded for successes, which she said is a formula for timidity. Her new job is more fun. At the fund, a separate corporation with its own board, she found a culture of high achievement.

Rodell's community in downtown Juneau welcomed her as a member after some initial suspicion as a Republican among Democrats. She climbs the nearby mountain trails with her yellow Labrador, Carter. She is 49.

Rodell said: "I love this place. And I have since the first plane ride to Anchorage in 1996. There's nothing like it. Alaska is a really special place, and I think people need to rediscover that and remind themselves of that."

A longtime fund watcher, economist Gregg Erickson, praised Rodell's honesty and intelligence. But he said she faces a daunting task. The fund is protected more by tradition than by law. And traditions can change.

"I think she has a sense of the public interest and she probably has a pretty good sense of the history and traditions, the mythology, maybe that has protected the Permanent Fund," Erickson said. "It really is a risk when you have a myth that everybody believes that doesn't stand up to reality."

The Legislature quietly ended a key tradition this year. Under a law passed soon after the fund's founding, the state has inflation-proofed the untouchable principal every year by redepositing a portion of earnings. This year it didn't appropriate that money, about $47 million.

It's logical to stop saving when you are spending your savings. But the change is transformational. Past inflation-proofing deposits account for 40 percent of the principal we have accumulated—as much as oil royalty deposits.

The fund is only as safe as the public demands. If legislators believe spending down the earnings is the easy route to a budget solution, neither Rodell nor anyone else can save the Permanent Fund.