Commentary: Legislators will dig into sudden termination of Permanent Fund Director Angela Rodell

By Tim Bradner
For The Cordova Times

State legislators will be digging into the sudden termination of Permanent Fund director Angela Rodell with the House-Senate Budget and Audit Committee examining the matter.

The Fund’s trustees voted to fire Rodell in an executive session Dec. 9. No explanation was given, with state personnel rules cited as justification for the confidentiality.

Sen. Natasha von Imhof, R-Anchorage, who chairs the committee, says she won’t settle with this kept under wraps given the Permanent Fund’s importance to the state budget. Its earnings pay for about 70% of general fund spending.

That Rodell presided over a spectacular runup in the Permanent Fund’s value and is highly respected in financial circles makes the matter all the more mysterious.

That the five trustees appointed by Gov. Mike Dunleavy voted for the termination and the one trustee not appointed by Dunleavy (some trustee terms overlap with a governor’s four-year term) voted against the action has inspired a lot of speculation on possible political motives.

One theory is that Dunleavy wanted to get Rodell out of the way so the governor could secure his overdraw on Permanent Fund earnings to pressure the Legislature to pay a jumbo Permanent Fund dividend this year, given that it’s an election year.

Rodell opposed the overdraw last year, and the Legislature did not authorize it anyway.

This is all grand stuff for conspiracy buffs but keep in mind that there may be simpler explanations. For example, it could be that Rodell had a run-in over other policy issues with the trustees, or at least those appointed by the governor, and the trustees prevailed.

If that’s the case, it should still be explained to the Legislature and the public despite personnel rules.

What argues against the conspiracy theory on the extra draw for the PFD is that all of the trustees, Dunleavy’s included, are on record as opposing ad hoc draws and supporting “rules-based” draws on fund earnings, which means sticking to the 5 percent-of-market-value annual payment the Fund makes to support the budget.

The overdraw advocated by the governor last year would have pushed the payment above 5%. That percentage is set out in a state statute passed by the Legislature which sets a framework for the Fund’s annual contributions, so that the Fund works similar to large university endowments that pay out a set amount each year.

Many financial analysts believe 5% is too high and that it should be 4% or 4.5% to really protect the Fund. That’s another discussion, however.

Back to Rodell: What also supports other reasons for the termination is that Rodell was very careful in her public statements last year, such as to the Legislature, to track the policies against ad hoc draws laid out by the trustees, all of them.

In this context she seemed a loyal trooper.

There were disagreements known, however. One was about compensation tied to performance for contracted managers of investment funds. The performance was superb – the Fund overall consistently outperformed its peers, meaning other large investment funds, and performance should be rewarded, it was argued.

Some of the trustees push back on this, saying the political optics weren’t right to be giving people raises when the PFD has been lower than the governor believes it should be. (Note that the Fund does not set the dividend. The Legislature does that).

Rodell pushed back, arguing that this introduced the whiff of politics – the amount of the PFD. We don’t know what happened after that, but things obviously went downhill fast.

No matter how this turns out, the Permanent Fund, and Alaska, are the losers. Even if this has a nonpolitical explanation the perception in the larger financial community is that that politics rules this $83 billion Fund. Alaska, in other words, is a land of political hacks.

It doesn’t look good for the governor either as he faces reelection if there is a perception among voters that he has meddled in the Fund’s affairs.

Can we attract a high caliber replacement for Rodell after this? How does it set with morale among the Fund’s staff or its contract managers? Remember that these people are high performers and highly sought after.

If we start losing talented investment managers, the effects won’t show up right away, but they will eventually.

The Permanent Fund is one of the things that Alaskans have done right. It has been a model for nations with natural resource revenues creating a structure with sustainable wealth.

Have we now damaged it?

Tim Bradner is editor and publisher of the Alaska Legislative Digest and Alaska Economic Report.