Permanent Fund earned $8.2 billion and sent none of it to protected principal

The Alaska Permanent Fund earned $8.2 billion in spendable income last fiscal year, and none of it moved into the principal Alaskans cannot spend.

Trustees of the Alaska Permanent Fund Corporation approved the audited FY26 financial statements Wednesday, Sept. 2, in Juneau. The statements, audited by KPMG, show the fund closed June 30 at $91.9 billion, up from $85.1 billion a year earlier, on a return of 12.42 percent net of fees. Statutory net income, the realized earnings that land in the Earnings Reserve Account for the Alaska State Legislature to appropriate, totaled $8.19 billion, against $5.87 billion the year before. Accounting net income, a broader measure that includes unrealized gains, was $10.11 billion.

The state drew $3.8 billion from that reserve for the general fund in FY26 under the percent of market value, or POMV, formula, which funds most current state spending and the dividend. Inflation proofing is the separate transfer that keeps the constitutionally protected principal, about two thirds of the fund, from shrinking in real terms. It spends nothing; it moves money from the side of the ledger lawmakers can appropriate to the side they cannot. The corporation estimated the FY26 inflation-proofing transfer at $1.5 billion and said in its announcement that, given the lack of appropriation, no transfer occurred.

The Alaska State Legislature enacted inflation proofing in 1982 at the request of the trustees, to protect the fund's purchasing power. A legislative briefing document this April called the transfer a policy decision rather than an automatic obligation, and recorded that rules-based inflation proofing has lapsed in recent years. APFC and legislative fiscal staff describe the choice as a tradeoff: money appropriated to inflation proofing is money not available for current state services or the dividend, and vice versa.

This was the second consecutive year with nothing transferred. Notes to the audited statements record inflation proofing rates of 2.63 percent for FY2026 and 2.95 percent for FY2025, producing required transfers of $1.6 billion and $1.7 billion, with no appropriation for either year. The $1.6 billion is what the rate produces; the $1.5 billion above is the corporation's estimate of the same transfer. The inflation-proofing component of principal has stayed flat at $27.6 billion across FY2024, FY2025 and FY2026.

The permanent fund corpus rose from $58.85 billion to $59.39 billion, a gain of $535.0 million. That is precisely the year's mineral royalty deposits, so royalties accounted for all the growth in protected principal. Realized earnings assigned for future appropriations climbed from $6.4 billion to $10.6 billion.

The statute, AS 37.13.145(c), says the corporation shall transfer from the earnings reserve an amount sufficient to offset the effect of inflation on the principal. The corporation's notes state that, based on advice from the Alaska Department of Law, the transfer should occur only by legislative appropriation.

Over twelve years the formula required $17,463.6 million and lawmakers appropriated $12,830.5 million, a cumulative shortfall of $4,633.1 million. The years itemized below account for $11.34 billion of what was appropriated; the remaining $1.49 billion is FY2027.

• Nothing was appropriated in FY2016, FY2017, FY2018, FY2021, FY2022, FY2025 and FY2026.

• FY2019 and FY2023 were funded in full, at $989.5 million and $4,179.3 million respectively; FY2024 was part funded at $1,413.0 million of $2,346.6 million.

• In FY2020 lawmakers appropriated $4,757.7 million against a $757.7 million requirement, which the corporation's notes attribute to intent language in that year's appropriation.

Chief Financial Officer Valerie Mertz presented that history to trustees at a committee meeting in Valdez on May 28, putting the cumulative deficit at $4.6 billion. Trustee Ralph Samuels compared it to withdrawals from the Constitutional Budget Reserve, the savings account the state draws on to close budget gaps. Chief Executive Officer Deven Mitchell distinguished the two, saying inflation proofing transfers stay inside the fund and reclassify assets from unprotected to constitutionally protected status. The record before the board carries no legislative explanation of the missed appropriations.

FY2027 inflation proofing is budgeted in full at $1,491.0 million. The FY27 POMV draw of $4.0 billion is already committed on the balance sheet. The board must publish its annual report to the governor and lawmakers by Sept. 30, the day its annual meeting opens.