Lon Garrison
Executive Director, Association of Alaska School Boards
It has been a strange start to the second session of the 34th Legislature. The mood in the Capitol seems pensive and guarded. It feels far more “political” than last session, when there was a unity of purpose around supporting public education. And maybe that is to be expected. A lot of political capital was spent last year, and the lack of trust between the Legislature and the Administration is palpable. Perhaps that, along with the fact that we are facing a grim, ever-declining revenue stream, has got me thinking about the Alaska Permanent Fund and what could be done differently.
I want to be transparent about what follows. This article was produced using AI, specifically ChatGPT 5.2, and Google Gemini. I guided the research with various prompts to better understand the Alaska Permanent Fund, its operation, and its role in funding Alaska’s government, including public education. I also investigated how Norway’s sovereign wealth fund, the largest and most successful in the world, compares and how Norway uses it to support government services for its citizens.
What follows is the product of my explorations.
When I first began asking questions about the Alaska Permanent Fund, my curiosity was simple: How did this remarkable institution come to be? And perhaps more importantly, why did Alaska decide to share its earnings directly with every resident?
That inquiry led me on a broader journey—one that moved from the oil fields of Prudhoe Bay to sovereign wealth funds around the world, and eventually to Norway. What began as a fiscal question ultimately became something more fundamental: How do we ensure that public education in Alaska is stable, appropriately funded, and treated as a basic right rather than a recurring political debate?
The Genesis of the Alaska Permanent Fund
The discovery of oil at Prudhoe Bay in 1968 transformed Alaska’s economic future. In 1969, the state received roughly $900 million from its first major oil lease sale—an extraordinary sum for a young state. Leaders feared that without guardrails, the money would be spent quickly and permanently.
In 1976, Alaska voters approved a constitutional amendment creating the Alaska Permanent Fund (Alaska Constitution, Art. IX, Sec. 15). The amendment required that at least 25% of mineral royalties be deposited into a permanent, constitutionally protected fund. The principal could not be spent without another constitutional amendment. The goal was intergenerational equity: convert finite oil wealth into enduring financial assets.¹
The Permanent Fund Dividend (PFD) came later. Governor Jay Hammond and others argued that Alaskans collectively owned the resource wealth and should share directly in its earnings. After early legal challenges, the modern dividend system began in 1982, distributing equal payments to eligible residents.²
The dividend served not only as a wealth-sharing mechanism but also as a political safeguard—ensuring broad public support for protecting the Fund.
Alaska in the Global Sovereign Wealth Context
Today, more than 100 sovereign wealth funds operate worldwide, collectively managing trillions in assets.³ Most are national funds designed to stabilize budgets, save for future generations, or diversify economies.
Alaska’s Permanent Fund is unusual in three ways:
- It is owned by a subnational government, not a country.
- It is constitutionally protected.
- It distributes annual earnings directly to citizens.
At approximately $86 billion (end of 2025), Alaska’s Fund is mid-sized globally but among the highest in the world on a per-capita basis.⁴
Comparing Alaska and Norway
The most instructive comparison is Norway’s Government Pension Fund Global (GPFG).
Norway’s fund, now valued at over $2 trillion, was created in 1990 to manage petroleum revenues for long-term national benefit.⁵ Unlike Alaska, Norway does not distribute cash dividends to citizens. Instead, it uses a fiscal rule that allows government to spend only the expected long-term real return—currently about 3%—while preserving the principal.⁶
Both Alaska and Norway:
- Convert oil into diversified global investments.
- Separate political leadership from professional investment management.
- Emphasize intergenerational equity.
But their philosophical divergence is clear:
- Alaska’s model blends citizen dividends with state services.
- Norway’s model integrates fund earnings directly into its national welfare state.
How Each Fund Supports Public Education
Norway’s sovereign wealth system stabilizes its entire national budget, including public education. Education is treated as a structural investment in human capital.
According to OECD data, Norway spends approximately $17,700–$19,800 per student annually in compulsory education.⁷ Higher education is tuition-free, and vocational pathways are deeply integrated.
In contrast, Alaska’s FY2026 Base Student Allocation (BSA) is $6,660 per student, following last year’s $700 increase.⁸ However, inflation-adjusted analysis indicates that to restore purchasing power lost since 2011, the BSA would require an additional $1,130 increase in FY2027.⁹
While Alaska’s per-student spending appears high nationally due to geography and scale, student proficiency levels (as reflected in NAEP comparisons with OECD benchmarks) generally lag national averages, and postsecondary persistence remains a concern.
Norway’s PISA performance tends to align with or modestly exceed OECD averages, with relatively low performance disparities among schools.¹⁰ Norway’s upper secondary completion rate typically ranges from 80–85%, with strong vocational integration.¹¹ Alaska’s graduation rate is higher—approximately 93%—but graduation does not consistently translate into postsecondary attainment or workforce readiness at comparable rates.
Modeling a Norway-Style Fiscal Rule for Alaska
Out of curiosity, I asked: What would Alaska’s education funding look like if we had followed Norway’s fiscal framework since the 1980s?
Using per-capita sovereign wealth comparisons, Alaska’s Permanent Fund might approximate $294 billion today under Norway-style accumulation discipline.
At a 3% sustainable draw:
- Annual revenue would approximate $8.8 billion.
- Closing Alaska’s $1,130 BSA inflation gap (~$143 million annually) would require roughly 1.6% of that sustainable draw.
- Permanently funding that increase under a 3% rule would require an education endowment of approximately $4.8 billion.
The modeling demonstrates something important: stability depends less on annual political negotiation and more on fiscal architecture.
The Deeper Question
This exploration ultimately returns us to the Alaska Constitution.
Article VII, Section 1 requires the Legislature to establish and maintain a system of public schools open to all children of the State. Public education is not discretionary. It is foundational.
My curiosity about Norway is not about emulating another nation’s policies wholesale. It is about asking whether we can design a fiscal system in Alaska where education funding:
- Is predictable.
- Is insulated from annual volatility.
- Is treated as structural infrastructure.
- Reflects our constitutional commitments.
We have demonstrated remarkable foresight in creating and protecting the Permanent Fund. The question before us now is whether we can apply similar foresight to the fiscal stability of public education.
The Permanent Fund transformed oil into financial capital.
Our next challenge is ensuring that financial capital reliably supports human capital.
That is a conversation worth having, and perhaps after the upcoming election this November, we will have a set of legislators and a governor that is serious about discussing a pathway to a stable and productive future for Alaska.
References
- Alaska Constitution, Article IX, Section 15.
- Zobel v. Williams, 457 U.S. 55 (1982); Alaska Permanent Fund Dividend Division history.
- Sovereign Wealth Fund Institute, Global SWF Rankings.
- Alaska Permanent Fund Corporation, 2025 Annual Report.
- Norges Bank Investment Management (NBIM), Fund Value 2025.
- Government of Norway, Fiscal Policy Guidelines (3% Rule).
- OECD, Education at a Glance 2024–2025.
- Alaska Department of Education & Early Development, Foundation Formula Overview (FY2026).
- Alaska Legislative Finance Division, BSA Inflation Analysis (2024–2025).
- OECD, PISA 2022 Results – Norway Country Note.
- OECD Upper Secondary Completion Data.
