ANCHORAGE, Alaska - A proposal by a think tank in Alaska recommends managing the state's natural-resource assets and special finance corporations - including the Alaska Permanent Fund - like an investment portfolio to "maximize their return," subject to performance benchmarks and possibly paying each resident an annual dividend on the return.
The idea would extend a concept already existing in the Alaska Permanent Fund, which already pays a dividend to residents.
The new "state investment portfolio" would include Alaska's many state-dedicated trust funds; its vast 104 million acres of land holdings, including underlying resources such as oil and timber; and other state assets, such as the Alaska Railroad Corp., and marketing boards such as those for tourism and seafood products.
This envisioned "managed state portfolio" would exclude public pension funds, state office buildings and school and other assets regarded as part of conventional services of a state, which all would continued to be run in traditional ways.
Commonwealth North, a private public-policy group in Anchorage, made the innovative recommendation in a report designed to suggest a way to finance the state's growing annual fiscal budget deficit. The deficit is projected at $904 million in the current fiscal year.
The 16-page report, titled "Alaska's Asset Portfolio: Managing for Maximum Return," doesn't mention the possibility of paying a dividend to residents on earnings of all of the designated state assets.
That possibility was raised by a coauthor of the report, Nancy Bear Usera, vice president-corporate relations, Alaska USA Federal Credit Union in Anchorage. She said she mentioned the dividend possibility in giving a presentation of the report in its release to the public this month.
Ms. Usera was a trustee of the Alaska Permanent Fund from 1992 to 1994 and was a member of the board of the state-owned Alaska Housing Finance Corp., both of which are part of the recommended managed portfolio of state assets.
The report calls on the state to "manage assets as a portfolio." It states:
*"The state should strategically manage its assets in a manner that provides for an integrated assessment of risk, potential return, debt, market conditions and cross investment opportunities."
*"Financial and beneficial returns on all assets under state management should be annually reported to the public on both an aggregate and individual basis using consistent accounting standards."
*"The portfolio of assets should be used strategically to achieve long-term sustainable revenue and return objectives."
The report emphasizes these state assets should "pay returns to the general fund."
It recommends:
*"To the extent that financial returns exceed the need for efficient operations, beneficial returns and appropriate capitalization, as determined by the Legislature, they should be deposited into the state Treasury for allocation by the Legislature based on the state's overall priority needs."
*"Every asset management organization should have an expectation to contribute a financial return to the state general fund based on a formula appropriate to its activities and maturity."
Ms. Usera said her remark on the possibility of paying a dividend to residents was an extension of the latter two ideas of the assets paying an annual return based on their earnings to the state's general fund.
The permanent fund, she noted, pays part of its earnings to the general fund and it is out of that the Legislature, not the permanent fund, decides to pay the annual dividend to each resident.
An estimate of the total value of the assets that would be put in the managed portfolio as recommended by the report was not computed, Ms. Usera said.
Commonwealth North didn't seek to survey all the state-owned assets, she said. The "managed portfolio" would include all the potential revenue-producing authorities and businesses owned by the state such as the Alaska Industrial Development and Export Authority.
The report didn't provide a complete list of state assets that it suggests putting in the managed portfolio. Instead, the Commonwealth North report selected significant examples, such as the Alaska Permanent Fund, to develop the concept of the portfolio management recommendation to promote its advantages for public policy.
Scott Goldsmith, the other co-author of the report and a professor of economics at the University of Alaska at Anchorage, and Ms. Usera said that, as envisioned by the report, all the state assets that would be included in the managed portfolio would continue under their present management structures and boards, but a coordinating board, much like managers of a mutual fund portfolio, would oversee the entire portfolio of state assets. How the board would be made up and who would be appointed to it would be something for the Legislature to decide, were it to adopt the Commonwealth North recommendations.
The Alaska Permanent Fund, which totals some $25 billion, would be the biggest easily quantifiable asset in the recommended portfolio. Another would be the Constitutional Budget Reserve, which is also financed by oil revenue. It totals about $3 billion and is used by the Legislature to finance budget deficits. It is managed in short-term investments.
Mr. Goldsmith said tht the recommended portfolio concept could provide more predictability in state revenue and expenses, allowing the Constitutional Budget Reserve Fund to be managed in a more diverse portfolio of longer-term investments. This would allow it to earn higher returns for the state.
"We have built a government with oil revenues and created the Alaska Permanent Fund," Ms. Usera said. "The report says we should step back from the Alaska Permanent Fund and look at all the state's assets and manage them together like a portfolio."
That would include managing assets to respond to market conditions, risk mitigation, long-term growth and meeting performance expectations to provide revenue to the state based on their earnings, she said.
"We use the analogy of a mutual fund in managing a portfolio of assets," she added.
"The concept of the dividend is a natural outcome if we do all these things and manage the assets effectively."
Mr. Goldsmith said that the report wants to extend to the other state assets "the well-defined purpose" of the Alaska Permanent Fund, "which makes it easy to manage."
Mr. Goldsmith and Ms. Usera said the Commonwealth North representatives plan meetings with state legislators and other leaders to promote the report. Officials at the Alaska Permanent Fund didn't return calls for comment about the report.
Officials at the Government Finance Officers Association in Chicago said that they were not familiar with the Alaskan recommendation. They said they knew of no direct counterpart of a coordinated management of state assets as a portfolio in place in any state.
