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DigitalBridge(erton)
We’ve been doing a number on our savings accounts for a bunch of years now. That’s the problem when revenues don’t match expenditures. Holding the spending down without raising the income, too, means the state taps savings to close the gap.
Our last significant savings account is the Constitutional Budget Reserve Fund. We used to have a lot of money in the CBR. Back then, we could earn more by investing it more broadly, holding some money for the short term and betting some on the longer term. That’s sure not the case these days. We keep the whole fund in cash-equivalent investments: low risk and highly liquid. That's the only choice for funds you know you'll need soon—you don't take the mortgage payment to Vegas.
That’s important for three reasons. (1) Without a fiscal plan, we rely on the CBR to fill holes in the budget. (2) The CBR is our emergency fund. When there’s a worse than expected wildfire season or other disaster, we need the dough. (3) The CBR is crucial for cash flow. The state can use it to cover payments in the first few months before the end-of-quarter oil tax payments come in—as long as we pay that back before the end of the year. It wouldn't do for the treasury to get the Venmo "Yikes! Something went wrong!" message.
The Department of Revenue has been a good steward of the state’s money for decades, investing with an eye toward meeting Alaska's needs. So I’m confused by what former Revenue Commissioner Adam Crum did this summer.
Shortly after his departure was announced, but before officially leaving, then-Commissioner Crum invested $50 million of CBR cash into DigitalBridge. I’d never heard of the company so I took a look. Who knows, maybe they provide cash-equivalent investments that made sense for the CBR?
Dearest gentle reader, they do not.
Here’s how the company wrapped up its most recent year-end investor call: “What DigitalBridge is, is the leading alternative asset manager focused on products for the digital economy and investing in the digital economy for the long term. Not the short term.”
The big question for the legislature and the executive branch is how this was allowed to happen? There’s a professional team at Revenue who make decisions based on carefully thought-out policy. Reporting so far makes it sound like Commissioner Crum made this decision on his own.
The money in the CBR is not one person’s account. It’s all Alaskans’ money. It would be a mess having the legislature pick individual investments, but maybe we need taller guardrails in place to make sure the money doesn't go places it shouldn't.
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