Shaping the permanent fund's future

Murkowski plans conference to consider use of Alaska Permanent Fund income

Posted: Wednesday, January 14, 2004

Gov. Frank Murkowski called for a conference Tuesday night to make recommendations on whether the state should use some income from the Alaska Permanent Fund to help pay for government.

During his State of the State address to a joint meeting of the Alaska Legislature, he announced the creation of a seven-member panel that will select another 44 participants to attend the conference. The leadership members of the state House and Senate also will participate in the conference.

"As the conference deliberates, let me make it very clear to Alaskans that there are two important principles on which I will insist for use of any portion of the permanent fund income," Murkowski said. "First, the people of Alaska must agree. We must have a vote on the proposal in November. Second, I will work with the Legislature for an effective constitutional spending limit in order to assure Alaskans that government will be frugal and efficient."

Conferees will meet at the University of Alaska Fairbanks in February to discuss a proposal by the Alaska Permanent Fund board of trustees to change the management structure of the fund.

Neither Murkowski nor the trustees have recommended using any of the earnings of the $27 billion fund to help pay for state government. But some state lawmakers have proposed using half the earnings, which would raise approximately $650 million a year.

Murkowski announced he will hold a special session of the Legislature on March 1 to consider legislation he will propose, based on the conference recommendations. It is unclear whether the Legislature would continue operations of its 120-day session during the special session or put other legislative initiatives on hold during that time.

The conference will make recommendations on the following questions:

• Should a portion of the income of the permanent fund be used for essential state services such as education?

• Should the use of the income for dividends and possibly for other purposes be determined annually by the Legislature, as it is now, or dedicated in the Constitution?

• Should the use of income from the permanent fund be limited by the Constitution to 5 percent of the fund's value, as the permanent fund trustees have proposed?

• Should the state maintain a minimum balance in the Constitutional Budget Reserve fund to stabilize state finances against fluctuations in oil production?

"I am asking the conference to address specifically these four issues so that Alaskans can assess what will happen to the dividend if we also use some of the permanent fund income to pay for essential public services," he said. "Also, what will happen to our economy, jobs and public services if we do not."

Murkowski noted that the Constitutional Budget Reserve, a $1.9 billion account used to balance the budget in recent years, is projected to dip below $1 billion in July 2006. Over the last 13 years, more than $5 billion of the $7 billion account has been used to close the state's chronic fiscal gap, he said.

"Allowing the Constitutional Budget Reserve to drop below $1 billion in order to continue to underwrite the budget deficit will not happen on my watch," Murkowski said.

He said construction of a natural gas pipeline is the top priority of his administration, but noted the state would not be able to reap the benefits of a gasline until the end of the decade.

"Prudhoe Bay took eight years to develop after it was discovered," he said. "It will likewise take time for new developments like the natural gas pipeline, the National Petroleum Reserve, and oil and gas from the Alaska Peninsula."

Murkowski also called for controlled state spending, increased municipal support for government services, and new taxes.

He said the state will spend less than in the current fiscal year, to help extend the life of the Constitutional Budget Reserve. Murkowski will hold a press conference today to fu

Governor's appointees

to the panel that will select conference members

• Chairman: Michael Burns, of Anchorage, is a former president of KeyBank, National Association (Alaska). Burns served three terms as chairman of the University of Alaska Board of Regents. He is a member of the University of Alaska board of trustees.

• Facilitator: Brian Rogers, of Fairbanks, is a consultant and chief financial officer for Information Insights, a management and economic consulting firm. He served in the House of Representatives from 1978 to 1982.

Conferees appointed by Gov. Frank Murkowski include:

• Steve Frank, of Fairbanks, is owner of River's Edge Resort and serves on the Permanent Fund board of trustees.

• Clark Gruening, of Juneau, is a partner in the law firm Gruening & Spitzfaden, APC. He served in the House from 1974 to 1978 and is a member of the permanent fund board.

• Marc Langland, of Anchorage, is chairman, president and chief executive officer of Northrim BanCorp, Inc. He has served as chair of the Alaska Permanent Fund Corp. and the state Chamber of Commerce.

• Helvi Sandvik, of Anchorage, is president of NANA Development Corp. She has served as chairman of the State Chamber of Commerce and as a member of the Alaska Industrial Development and Export Authority.

• Arliss Sturgulewski, of Anchorage, served in the Senate from 1978 to 1992 and was a candidate for governor in 1986 and 1990.

• Eric Wohlforth, of Anchorage, served as commissioner for the state Department of Revenue from 1970 to 1972. He has served as a trustee and chairman of the Alaska Permanent Fund Corp. and is vice chairman.

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