JUNEAU — Warning that Alaska faces a 50% chance of “catastrophic fiscal failure” within the next 20 years, the trustees of the Alaska Permanent Fund Corp. voted unanimously Thursday to recommend two possible fixes that would reform the way the fund operates.

It’s an extraordinary step for the trustees, an apolitical group that has issued specific recommendations only a handful of times since the fund’s creation in 1976.

In analysis revealed late last month, the leaders of the $66 billion Alaska Permanent Fund found the fund’s current structure fails under both extremely good and extremely bad market conditions.

Each year, the fund transfers money to the state treasury for the Permanent Fund dividend and government services. During boom times, with several years in a row of major gains for the fund, conflicting state laws would call for a dividend larger than the annual transfer.

In lean times, with multiple downturns on the scale of the Great Recession, the spendable portion of the Permanent Fund would run out of money.

“It would mean we couldn’t fund the government and we couldn’t fund people’s dividends,” trustee board chairman Craig Richards said.

As currently structured, the Permanent Fund consists of two main accounts. Money in the “corpus,” or principal, is constitutionally protected and cannot be spent. When the corpus is invested and earns interest, those earnings are deposited into the “earnings reserve,” which can be spent with a simple majority vote of the Legislature.

Since 2018, the state government’s largest source of revenue has been the annual transfer from the earnings reserve to the state treasury.

In addition to funding services and the dividend, the earnings reserve acts as a shock absorber during market downturns. When the Permanent Fund’s investments lose value, those losses are taken out of the reserve, and the corpus remains untouched.

On Thursday, the trustees recommended two possible solutions.

Under one fix, trustees would see the two accounts merged, eliminating the chance of the earnings reserve running out of money.

Under the other, the Legislature would mandate the reserve be kept large enough to absorb stock market shocks and the annual needs of the state treasury.

Neither option directly affects the size of the Permanent Fund dividend. But merging the two accounts would more firmly cap the amount of money available for both dividends and the treasury.

In 2018, lawmakers imposed a spending cap that can be overridden with a simple majority vote of the Legislature. If the accounts are merged, the Legislature can’t override the spending cap any longer.

Any fix, however, is up to the Alaska Legislature and Gov. Mike Dunleavy.

“I think we’ve given them plenty of options on this. No one can feel like they’ve been painted into a corner,” said Corri Feige, a trustee and commissioner for the Alaska Department of Natural Resources.

One of the trustees’ ideas already has a toehold in the Legislature. Rep. Jonathan Kreiss-Tomkins, D-Sitka, has proposed a constitutional amendment that would merge the earnings reserve and corpus.

He said the idea has majority support in the House, but he doesn’t know if it has the necessary supermajority to pass. Twenty-seven of the House’s 40 members are needed to pass a constitutional amendment, plus 14 senators and a majority of voters in the next election.

If a constitutional amendment lacks sufficient support, the trustees have suggested an alternative using only state law, but that is more vulnerable to a legal challenge.

Speaking to a lunchtime gathering of the Juneau Chamber of Commerce on Thursday, Permanent Fund Corp. CEO Angela Rodell said the fund is agnostic about which choice the Legislature and governor make, but they need to pick one.

Keeping the earnings reserve large — four times the size of the annual transfer to the state treasury — is the most straightforward approach. But while that protects the fund from financial swings, it doesn’t protect it from political swings. Legislators and the governor could spend that money if they agree.

The alternative, merging the earnings reserve and corpus, locks down spending, but is more complicated and less flexible.

Rodell said the issue comes down to one key question: “How are we, as Alaskans, going to think about the Permanent Fund?”

“We haven’t said what we want it to be,” she said. “We’ve said we want it to be the way it’s always been, but it can’t be the way it’s always been.”