Alaska Permanent Fund Loses $2.2 Billion Amid Market Turmoil

JUNEAU, Alaska — The Alaska Permanent Fund decreased by $2.2 billion last week due to significant stock market fluctuations, but fund managers reassured the public on Monday that there was no immediate cause for concern. A sudden drop in oil prices may pose a greater threat to state finances, according to lawmakers and economists.

As of Tuesday, the Permanent Fund’s value stood at $81.9 billion, but by Friday’s market close, it had declined to $79.7 billion. This downturn was sparked by President Donald Trump’s trade actions against U.S. trading partners, leading the S&P 500 to drop substantially over just two days, which resulted in a 2.7% loss for the Permanent Fund.

The Alaska Permanent Fund is crucial for the state, contributing approximately 59% of state revenue, which supports essential services and funds the annual Permanent Fund dividend. Deven Mitchell, executive director of the Alaska Permanent Fund Corp., emphasized that the fund is well-diversified and capable of weathering the loss of public equity. “There’s cause to pay attention, and we are paying attention, but not a cause for alarm at this point,” he stated.

Mitchell also highlighted that the fund’s other asset classes, including real estate, private equity, and bonds, remain largely unaffected by the market decline. “Those other portfolios are very stable,” he added. The Permanent Fund has withstood various economic challenges in recent years, including the COVID-19 pandemic and the 2008 financial crisis.

Managers of the fund aim to rebalance its assets into public equity, anticipating a long-term market recovery. The Permanent Fund has evolved significantly since the Alaska Permanent Fund Corp. was established in 1980, becoming a major component of the state budget. In 2018, the legislature instituted an annual 5% draw from the fund’s market value to finance state services and dividends. This draw is determined based on the average value of the fund over the previous six years.

Kevin Berry, a professor of economics at the University of Alaska Anchorage, explained that the mechanism is designed to cushion the state from market volatility. “It’s supposed to help smooth over these market drops or rapid increases,” he remarked. “We’re not supposed to be dramatically changing how much we draw based on market movements.” Berry assessed the current situation, stating, “I don’t think it’s a panic-and-break-glass moment yet.”

The Permanent Fund’s managers begin preparing for the annual distribution months in advance. In July, they will allocate cash to assist lawmakers in crafting the state budget for 2026. At that time, $5.5 billion must be available—$4 billion for state services and dividends and $1.5 billion for inflation-proofing to maintain the fund’s value. Currently, the Permanent Fund has $3.2 billion in uncommitted earnings, but Mitchell warned they may not meet the necessary target: “We might not have enough to provide for inflation-proofing, and the Legislature is well aware of that.”

Historically, legislators have temporarily suspended inflation-proofing measures to save funds, but those payments have always been restored. The Permanent Fund consists of two accounts: the principal, which is constitutionally protected and can only be spent through a statewide vote, and the Earnings Reserve Account, which can be accessed with a simple majority of the Legislature.

According to a nonpartisan assessment from the Legislative Finance Division, there is a 50-50 chance of failure for the Earnings Reserve Account within the next decade. On Monday, Mitchell indicated that a prolonged market downturn could heighten this risk. Barry expressed uncertainty concerning the long-term effects of Trump’s tariffs, stating, “It’s unclear what the policy goal is with the tariffs, or when they might be lifted, or how. And so forecasting anything like that, I think, is close to impossible.”

Meanwhile, the state is facing immediate financial challenges due to sharply falling oil revenues, which have exacerbated the state’s budget deficit. The price of Alaska North Slope crude oil has plummeted by 12.7% in the last week, falling from $77.33 a barrel to $67.48 by Monday.

Legislators are grappling with the implications of decreased oil revenue, which has escalated the state’s deficit projection over two fiscal years. Last month, the Alaska Department of Revenue estimated the state would lose approximately $160 million in revenue due to declining oil prices if its latest forecast were issued today. The Senate has proposed new revenue measures to address the state’s fiscal crisis, but lawmakers anticipate obstacles in passing these measures through the narrowly divided House.

Sen. Bert Stedman, a Republican co-chair of the Senate Finance Committee, expressed trepidation over further oil price drops but recognized the importance of controlling inflation. “That’s why we’re adamant holding the line on the budget this year,” he stated.