State Sovereign Wealth Funds: A Model for a U.S. National Investment Fund?
The idea of a U.S. sovereign wealth fund (SWF) has long been a topic of debate, but the conversation has recently gained momentum following President Donald Trump’s executive order directing officials to draft a proposal for such a fund. While the concept of a national SWF may seem novel, several U.S. states have already established their own wealth funds, primarily using revenues from natural resources, taxes, and other state income streams. These funds serve as potential models for how a national SWF could be structured and managed.
Existing State-Level Sovereign Wealth Funds
Across the United States, multiple states have established sovereign wealth funds to manage and invest surplus revenues, with varying purposes and funding mechanisms:
Alaska – Alaska Permanent Fund (APF): Established in 1976 and funded by petroleum revenues, this fund is notable for distributing annual dividends to residents.
Texas – Texas Permanent School Fund (PSF) & Texas Permanent University Fund (PUF): Established in the 19th century, these funds are financed by land and mineral rights, primarily from oil and gas revenues, to support public education and universities.
Wyoming – Wyoming Permanent Mineral Trust Fund (PMTF): Established in 1974 and funded by severance taxes on mineral extraction, this fund provides long-term financial stability for the state.
New Mexico – New Mexico Permanent Funds (Land Grant & Severance Tax Funds): These funds, supported by oil, gas, and mineral revenues, help fund public education and infrastructure projects.
North Dakota – North Dakota Legacy Fund: Created in 2011 and backed by oil and gas tax revenues, this fund is used for state development projects.
Utah – Utah Permanent State Trust Fund: Funded by state land and mineral revenues, it provides long-term financial support for various public initiatives.
Montana – Montana Coal Trust Fund: Established in 1975 and financed by coal severance taxes, it contributes to economic development and state government funding.
Alabama – Alabama Trust Fund: Established in 1985 and funded by offshore oil and gas revenues, it supports state infrastructure and government operations.
Louisiana – Louisiana Education Quality Trust Fund (LEQTF) & Louisiana Permanent Trust Fund: These funds, fueled by offshore oil and gas revenues, are used for education and public services.
West Virginia – West Virginia Future Fund: Established in 2014 and financed by oil and gas severance taxes, this fund is intended for long-term state investments.
Idaho – Idaho Endowment Fund and Oregon – Oregon Common School Fund: These funds manage revenues from public lands and other resources to support public schools.
A National Wealth Fund: A Longstanding Idea
The idea of a U.S. sovereign wealth fund is not new. Past administrations have considered similar proposals but have faced political and logistical challenges in implementing them. Presidents from both parties have entertained the concept, recognizing the potential benefits of a fund that could generate revenue for public programs without raising taxes.
During his presidency, Franklin D. Roosevelt explored ideas for public investment funds as part of his New Deal economic policies. More recently, President George W. Bush’s administration discussed using oil revenues to establish a stabilization fund. Similarly, Barack Obama’s administration considered mechanisms for reinvesting federal revenues from natural resources into long-term assets.
Now, President Trump’s executive order to explore a national sovereign wealth fund has reignited the discussion. The proposed fund could be modeled after successful state-level funds, using federal revenues from natural resources, trade surpluses, or other income streams to build a long-term financial reserve.
Conclusion
With multiple U.S. states already operating successful sovereign wealth funds, there is a precedent for establishing a national counterpart. Such a fund could serve as a buffer against economic downturns, reduce reliance on taxation, and provide long-term financial security for the country. As policymakers begin drafting proposals in response to Trump’s executive order, they may look to the experiences of states like Alaska, Texas, and North Dakota for guidance on best practices and potential pitfalls. Whether or not the idea gains enough political traction remains to be seen, but one thing is clear: sovereign wealth funds are not just a foreign concept—they are already a working model within the United States.
