Social Wealth Funds

Description and History

Inspired by sovereign wealth funds from around the world (Sovereign Wealth Fund Institute 2024), a social wealth fund is a publicly-owned pool of income-generating assets (i.e. financial capital) (re)distributed for social benefit. In the United States, these funds are more commonly known as “permanent funds” and are one of the Generally Accepted Account Principles (GAAP) adopted by the U.S. Securities and Exchange Commission (SEC) in the late 2000s (Hammer et al. 2008). 

Social Wealth Funds, Locally Rooted Finance, and the Community Wealth Building Wedge 

Social wealth funds are considered to be an opportunity to democratize the wealth that is, at its root, co-created by—or, in many cases, historically extracted from—a community of people (Barnes 2014). As a redistributive approach, social wealth funds are often capitalized by revenues from private, extractive industries, including oil and gas. These dollars, in turn, are used to meet gaps in public infrastructure including: climate change mitigation projects; equitable community development in underserved communities; local and worker-owned business development; education; transportation; healthcare; and the recapitalization of retirement funds and pensions. 

It is important to note that as we move through a Just Transition toward more green energy and other generative forms of production, social wealth funds could be capitalized from revenues of such, more sustainable, industries. That capital (though redistributive), in turn, could be used to build out redistributive elements and institutions like inclusive and democratic enterprises beyond cooperatives, land trusts, community funds, universal basic income projects, and more. Democratic allocations processes, ideally, can be instrumental in determining the future of social wealth fund dollars. 

Examples

Example # 1: Alaska Permanent Fund Corporation

Sixty-six percent of Alaska’s voters approved a constitutional amendment in 1976 creating this fund. At least 25 percent of revenues from oil reserves are placed in the fund, and the fund received its first deposit of $734,000 in February 1977. Residents received their first dividend checks ($1,000) in 1982. Since then, dividend payments have tended to average around $1,000 per year per person, but have been as high as twice that. By June 2024, the fund managed over $80.3 billion in assets with a nearly eight percent rate of return over the previous five years (APFC 2024). A 2017 Economic Security Project study found the program is immensely popular: 79 percent reported that the dividend is an important source of income in their community and 72 percent reported that they spend their dividend primarily on basic needs and savings.

Example # 2: Oregon’s Common School Fund 

Much like Texas’s Permanent School Fund and Permanent University Fund, Oregon’s Common School Fund leverages the wealth created from land sales to generate revenue that is then redistributed to public schools in the state. The Department of State Lands manages the leasing and selling of 680,000 acres of land (Baumhardt 2024). In 2024, the Fund distributed $74.2 million to Oregon’s public school districts (Oregon Department of State Lands 2024). 

Challenges & Limitations

As of today, there are less than 10 permanent funds in the United States. The majority of these funds are reliant on extractive industries like oil and gas (e.g. New Mexico State Investment Council, Texas Permanent University Fund), offshore drilling (e.g. Alabama Trust Fund), and mineral mining (e.g. Wyoming Permanent Fund) for capitalization—industries that, by their very nature, preclude ecological sustainability, a central tenet of Community Wealth Building. In this way, social wealth funds may exacerbate the very challenges they are used to address. 

Further, the current design of these funds do not inherently challenge a market-based system, but simply democratize its positive externalities. In order to align these funds to the overarching principles of Community Wealth Building, there needs to be a real interrogation of both their capitalization and governance. Because governments are often responsible for setting up and managing these funds, there is sometimes concern about allocations being politically—rather than socially—motivated. According to an expansive policy toolkit from the Democracy Policy Network, “Regular reporting, audits by watchdog institutions, and insulation from short-term political pressure are key to the success of SWFs. Even before being established, legislators can encourage transparency and accountability by encouraging public participation in the design and implementation of the fund” (Hicks 2024). Essentially, ensuring community ownership and deep democracy across all fund-related activities is critical to good governance.  

Taking It Forward

In 2018, Matt Bruenig, founder of People’s Policy Project, published “Social Wealth Fund for America”, a report which calls for a national social wealth fund to catalyze an expansion of the middle class, building household wealth for all Americans (Bruenig 2018). 

In his proposal, Bruenig outlines the formation of such a fund—from capitalization to management to dividend distribution. In particular, he (and other advocates for such a fund) outline a myriad of less extractive funding alternatives, such as share levies on large profitable corporations, wealth and inheritance taxes on the super wealthy, revenues from leasing public assets, carbon or financial transaction taxes, or simply through new money creation (as the Federal Reserve did with quantitative easing in the wake of the 2008 financial crisis). Ultimately, these funds could be a critical means of creating steady streams of public, democratically controlled dollars toward CWB activity, moving our movement away from private, oft-unaccountable financing and philanthropic capture.

Additional Resources