Former Revenue Commissioner Adam Crum has defended his decision to invest $50 million from the state’s primary savings account into a private equity fund managed by DigitalBridge. This move has sparked concerns among lawmakers, leading them to request an audit of the investment.
Additionally, there are growing apprehensions within the Department of Revenue regarding the processes that led to this investment.
Crum’s successor, acting Revenue Commissioner Janelle Earls, has voiced concerns about the investment process, prompting Governor Mike Dunleavy to order an independent review to assess potential violations of policy and propose improvements to the process.
According to Aimee Bushnell, a spokesperson for the Department of Revenue, DigitalBridge is cooperating with the investigation. However, she noted that the contract initiated by Crum cannot be terminated.
Crum, who is also a Republican candidate for the 2026 gubernatorial race, expressed surprise at the scrutiny surrounding the investment. In his defense, Crum stated that the investment aimed to enhance the returns on the state’s investments, representing roughly 1.7% of the nearly $3 billion in the state’s Constitutional Budget Reserve.
“Our goal was to invest in areas that we anticipate will grow,” Crum commented during a phone interview. “These include companies focused on cell phone towers, digital assets, and AI data centers, which seem to be promising sectors for future returns.”
Crum worked on this investment for over a year and postponed his resignation to finalize it. The state committed the funds to DigitalBridge on July 28, just three days after Crum announced his departure.
He insisted that all actions adhered to state policy and lawful procedures throughout the investment process. Crum stated, “There was Department of Law sign-off, governor’s office sign-off, all of that was there throughout. This was not something that was done by fiat.”
Bushnell conveyed that while Crum approached the governor’s office with the investment idea, Dunleavy’s staff reminded him that all investments need to comply with established policies and procedures.
Typically, the majority of the reserve is allocated to low-risk products such as short-term U.S. Treasury bills, which can be readily converted to cash when the state requires access to funds. This strategy has been in place since July 2020, following an analysis indicating that the reserve could deplete within 12 to 18 months.
Former Deputy Revenue Commissioner Brian Fechter emphasized the critical need for a budget reserve account to consist of liquid investments that can be promptly converted into cash to support government operations during revenue shortfalls.
Nevertheless, state law allows a portion of the Constitutional Budget Reserve, referred to as the “subaccount,” to be invested with the intention of yielding higher returns. Established in 2000, the subaccount was emptied in 2015 as a risk-reduction measure.
Alaska has some experience with private equity investments, which enable the state to invest in non-publicly traded companies. The state’s pension funds include over $5 billion in private equity assets, while the Alaska Permanent Fund holds nearly $15 billion. Fund managers assert that private equity and other alternative investments significantly contribute to overall growth.
However, private equity investments are typically associated with lock-up periods that can hinder quick access to cash. Crum mentioned that these periods generally range from five to 15 years.
Senate President Gary Stevens and House Speaker Bryce Edgmon issued a statement expressing their concerns about the risks and accessibility of such private equity investments, arguing that they are unsuitable for the state’s rainy-day fund.
“The (Constitutional Budget Reserve) was created to ensure stability in times of deficit and emergency, allowing essential services and operations to continue during revenue shortfalls,” they stated. They asserted that investing tens of millions into illiquid and high-risk assets could undermine that objective and raise significant questions about accountability, transparency, and fiscal management.
In recent years, the state has frequently tapped into the reserve to address budgetary shortfalls, and lawmakers have voiced worries about the likelihood of increased reliance on the fund due to uncertainties surrounding oil revenues and federal financial support.
It remains unclear how much of the $50 million allocated to the private equity investment could be accessed in times of emergency. Crum suggested that provisions exist within the DigitalBridge contract allowing for a “fire sale” exit, albeit at a substantial discount. He noted that realizing a return on the investment would likely take around five years.
Despite the concerns raised, Crum posited that it would be unlikely for the state to require immediate access to funds. He characterized the Legislature’s scrutiny as “amusing” and suggested that the governor’s order for a review might be an attempt to foster better relationships with lawmakers.
“If we’re to the point where we’re disputing our last $50 million as a state, then we are already completely done,” he remarked.
image source from：alaskapublic
