It never leads the evening news. There's no dramatic vote, no veto signing, no rally. But quietly declining to inflation-proof the Permanent Fund may be the single most consequential decision the Legislature makes — or avoids making — in a given year.
A refresher on what it is
The Fund has two parts: a constitutionally protected Principal that can't be spent, and a spendable Earnings Reserve. Inflation-proofing is an annual transfer from the Earnings Reserve back into the Principal, sized to match inflation, so the Principal keeps its purchasing power instead of slowly bleeding value. (We walk through the mechanics in the inflation-proofing explainer.)
State law — AS 37.13.145(c) — directs the Legislature to do this every year. The catch: under the current two-account structure it isn't automatic. It only happens if lawmakers appropriate it. And in tight budget years, that appropriation is one of the first things on the chopping block.
Why a "bigger" Fund can still be shrinking
Inflation is invisible on a balance sheet that only shows dollars. Consider a real example: around July 1, 2022 the Fund held about $77.7 billion; a year later it was roughly $79.2 billion. A bigger number — but with inflation running near 3%, the Fund needed to reach about $80 billion just to hold the same real value. In buying power, it went backward.
A fund can post a larger dollar figure every year and still be losing ground. That's what inflation does in the dark.
Now multiply that across multiple years. From FY2019 through FY2024, fully inflation-proofing the Fund required roughly $11.3 billion in transfers. Skip those transfers and you don't just lose a year — you lose the compounding those dollars would have earned for every future generation.
Who actually decides — and why it's so skippable
The decision sits with the Legislature, in the annual budget, with the Governor able to veto. The Fund's own trustees can warn and recommend, but they can't make the transfer themselves. So when money is tight, inflation-proofing competes head-to-head with the dividend and with schools, troopers, and roads — and because almost no one is watching that line, it tends to lose.
That's the heart of the problem: a routine, essential act of stewardship has been turned into an optional, annual political choice. Recent budgets have repeatedly underfunded or skipped it entirely.
The fix is structural
You can fight this fight every single year — or you can make it automatic. Two reforms would do that: combining the Principal and Earnings Reserve into one fund governed by the percent-of-market-value draw (so there's no separate transfer to skip), or writing inflation-proofing into the constitution so it's out of reach of any one budget. We lay both out on the reforms page.
Until then, the best defense is attention. The next time a budget moves through Juneau, there's a simple question worth asking your legislators: "Did we fully inflation-proof the Fund this year?" If enough Alaskans ask it, the quietest cut won't be so quiet anymore.