The Landmine has learned that former Revenue Commissioner Adam Crum committed $50 million from the Constitutional Budget Reserve Fund (CBR) to an outside investment firm, DigitalBridge, according to three sources familiar with the matter. 

According to sources, Crum signed the contract at the end of July, not long before his last day as commissioner. Crum’s resignation was announced on July 25 by Governor Mike Dunleavy (R – Alaska), and his last day was August 8. Three days later he filed to run for governor.

Crum is one of 10 Republicans currently in the governor’s race. 

Surprisingly, officials in the Department of Revenue were unaware of the contract, and only became aware of it when DigitalBridge contacted them with a $50 million cash call. This occurred after Crum had resigned. 

The Landmine has submitted a records request for the contract, as well as correspondence on the matter between senior Department of Revenue officials and senior officials in the Governor’s Office.

State statutes give the Revenue commissioner broad authority on investment decisions, and allow for contracting with outside firms for some state assets.

Section (b) of Alaska Statute 37.10.070. Investment of residual money states:

(b) The commissioner may invest on the basis of probable total rate of return without regard to the distinction between principal and income and without regard to the generation of income.

Section (b) (1) of Alaska Statute 37.10.071. Investment powers and duties states:

(b) Under this section, the fiduciary of a state fund or the fiduciary’s designee may

(1) delegate investment, custodial, or depository authority on a discretionary or nondiscretionary basis to officers or employees of the state or to independent firms, banks, financial institutions, or trust companies by designation through appointments, contracts, or letters of authority;

However, the CBR – which is the state’s main savings account – currently holds just $3 billion. Since 2022, the state’s Investment Policy and Procedures manual has recommended a low risk tolerance for the CBR, with a 100% allocation into cash equivalents like 3-month Treasury Bills. 

In the past, when the CBR was much larger, asset allocation was more risk tolerant as the state was not as reliant on the CBR for short-term cash needs. 

In his last proposed budget, Governor Dunleavy suggested using half of the CBR to pay a full statutory dividend. The Legislature ultimately rejected that because they did not want to spend down the state’s dwindling savings account. And for the Legislature to access the CBR, a three-fourths vote is required (15 Senate, 30 House) – a tough threshold to meet. 

For some context, in FY2015 and FY2016, after the price of oil crashed, deficits exceeded $3 billion each year. With a current balance of just $3 billion, it’s important that the CBR remains liquid in the event of a significant deficit or emergency. 

Crum’s $50 million commitment from the CBR to DigitalBridge was likely going to private equity – a higher risk and less liquid investment. 

Brian Fechter, a past deputy Revenue commissioner, told the Landmine, “Alaska uses Callan to provide capital market assumptions on risk and return to inform its asset allocation decisions. According to Callan, private equity is expected to have the highest risk of any asset class in the investible universe. Private equity is illiquid and hard to sell if cash is needed fast. It is a wholly inappropriate investment for a budget reserve account that needs liquidity to fund the day-to-day operations of government in the event that the price of oil collapses, as it has many times in the past.”

According to sources, state officials have been exploring if it’s possible to get out of the contract. But it’s tricky as the former Revenue commissioner signed a legal contract with DigitalBridge. Sources confirm that the state has encumbered $50 million from the CBR while they are dealing with the issue. It’s not yet clear if any money from the CBR has been transferred to DigitalBridge.

The Department of Law has also been engaged to work on the issue, per sources. 

In June, Severin White, a managing director for DigitalBridge, was a speaker at Governor Dunleavy’s annual Alaska Sustainable Energy Conference. He spoke on “The Intersection of Data and Demand.” 

DigitalBridge was founded in 1991 as Colony Capital. In 2021, they changed their name to DigitalBridge. According to their website, they have $106 billion in assets under management. 

This is a developing story.