Firing of Permanent Fund CEO Angela Rodell creates a political firestorm

Alaska’s venerable Permanent Fund, 45 years old and now $80 billion-plus in value, is facing its first real political crises. Without explanation the Fund’s trustees fired CEO Angela Rodell Dec. 9. Rodell led the Fund’s helm through its dramatic growth in recent years. She is highly regarded in financial circles.

The lack of an explanation by the trustees has set off a political firestorm in the Legislature, which has set hearings in January to investigate the matter. Five of six trustees, all appointed by Gov. Mike Dunleavy, voted to fire Rodell. Only Ketchikan banker Bill Moran, a trustee appointed by former Gov. Bill Walker, voted against the firing.

The trustees did not explain the action, claiming it is a personnel matter. Legislative leaders say they will not accepting that, given the Fund’s importance to stability of the state budget. Two thirds of the state general fund budget is now paid from earnings of the Fund.

An immediate concern is how the financial entities the Fund works with, as well bond rating agencies watching the state of Alaska, will react to a demonstration of instability in the Fund’s governance where some are suspecting political motives. Another worry is how the action will affect morale among the Fund’s employees and particularly its investment managers.

What is known is that there was a disagreement between Rodell and several trustees over performance bonuses for Fund asset managers, whose performances Rodell felt were exceptional. The Trustees (governor appointed) who opposed this had complained of a bad appearance of paying bonus at a time when a $1,114 Permanent Fund Dividend was to citizens that was less than the approximate $2,300 Dunleavy wanted. The Legislature sets the dividend, not the Permanent Fund.

There were likely other issues that have yet to be revealed, such as Rodell’s opposition to Dunleavy’s plan to take extra draws from the Fund to pay large PFDs. However, that one known issue between Rodell and the trustees involved “optics” over the PFD does bring politics into the equation. This will be noted by world financial community, which watches the Permanent Fund closely because of its size.

State legislative leaders reacted strongly to Rodell’s firing. “There is a lot of concern that this clearly politically related in that the Permanent Fund board is being set up and pushed to become more of a political arm of whoever the sitting governor is,” State Sen. Bert Stedman , R-Sitka, who cochairs the Senate Finance Committee, said in comments to the Anchorage Daily News.

“That is something that we have avoided for years and should continue to avoid,” he said.

Similar sentiments were voiced by Sen. Natasha von Imhof, R-Anch., chair of the House-Senate Budget and Audit Committee. “I think it’s very, very important that the fund remain independent. That will lead to success, and it cannot be politicized,” von Imhof said. Rep. Andy Josephson, D-Anchorage, told the Daily News, “I think they (the trustees) didn’t like her conservative approach to spending from the Permanent Fund.”

The firing simply could boil down to a tiff between Rodell and the trustees, or most of them, in which the trustees prevailed. “Maybe I’m wrong,” Josephson told the Daily News. “Maybe something else happened internally. Who knows? But it doesn’t look right to me. Even if it was simply a policy difference, the way the matter was handled will erode confidence in the Fund’s ability to manage its affairs.

Meanwhile, many in the press and soon the Legislature will be looking for connections between the governor’s office and the trustees in the action. If a link is found it will look bad for Dunleavy, who is running for reelection, but it will also increase cocerns about the state’s financial stability, now based mainly on how the Permanent Fund performs. With the state still mired in pandemic recession and its major industry, oil and gas, still in a slump, the Permanent Fund is the only strong part of the state’s fiscal and economic foundation.

What is likely embarrassing for the Fund’s trustees is that Rodell was recently named chair of the International Forum of Sovereign Wealth Funds, a network of governmental organizations, and the Permanent Fund Corp. itself is expected to be named the best place to work among financial services businesses and organizations in the U.S. An independent audit of the Fund found no issues.

However this turns out, it will heighten concerns over the governance of the Fund and will encourage a change in the Fund’s governance mechanisms. Currently, the independent trustees’ four-year terms are set so that it is possible for a governor to appoint the majority during his or her four-year term.

One change could be for staggered terms, with legislative confirmation, so that there is less chance of political control by one governor. Josephson told the Daily News he intends to draft legislation that would require future trustees to be appointed by an independent panel instead of the governor. The idea would be to insulate the Permanent Fund from political decisions, he said.