Dems reserve judgment on plan; GOP stresses spending limit

Posted: Wednesday, January 14, 2004

The governor's proposal for a process to determine whether to use part of the Permanent Fund income for state government is not the way Democrats would have handled Alaska's fiscal gap, but they are reserving judgment on the plan, minority lawmakers said Tuesday night.

Gov. Frank Murkowski's plan involves convening a conference in Fairbanks next month to decide whether to put the issue to voters during the November general election. Among questions the governor wants the conference to answer is whether a portion of Permanent Fund earnings should be used for state services, and whether that is an issue that should be decided annually by lawmakers or formalized in the state constitution.

He also wants participants to address whether to place a 5 percent cap on the state's use of the fund. The governor made his proposal during his State of the State address Tuesday evening.

"This is not the way Democratic legislators would have done it. We would not have gone after your Permanent Fund first," said Senate Minority Leader Johnny Ellis of Anchorage.

Still, Ellis and House Minority Leader Ethan Berkowitz of Anchorage said they were adopting a "wait-and-see attitude."

But Sen. Kim Elton, a Juneau Democrat, said he was concerned about the way the governor has chosen to handle the matter in the Legislature. Murkowski has called for a special session starting March 1, during the regular session, during which he plans to introduce legislation for a ballot initiative incorporating the ideas of the conference. Special sessions can run a maximum of 30 days, and Elton said he wasn't sure that was enough time for the public to evaluate and weigh in on the issue.

Berkowitz said development of a natural gas pipeline to carry Alaska gas to the Lower 48 is the best prospect for closing the fiscal gap. Murkowski mentioned the pipeline in his speech, saying it was the administration's top priority, but cautioning that it could take a decade before the economy benefits from it.

"I want to make sure that the governor actually does something toward building the gas line," Berkowitz said.

The state is soliciting applications from the major oil and gas players to build the pipeline. Several companies have expressed interest, but no applications have been submitted.

Republicans offered restrained praise for the governor's plan and emphasized the importance of a constitutional spending limit. A bill proposed last session that is still alive in the Legislature would disallow lawmakers from increasing spending by more than 2 percent of what it spent the two previous years.

Legislators could increase spending up to 4 percent with a three-quarters vote. The current constitutional spending limit, adopted in the early 1980s, is outdated.

House Speaker Pete Kott of Eagle River said the House is unlikely to pass legislation calling for a 5 percent cap on the state's Permanent Fund draw unless it also passes the constitutional spending limit.

The 5 percent cap is part of the proposed Percent of Market Value plan, or POMV, which also would inflation-proof the entire fund by combining the principal and the earnings in the same account. Right now only the principal of the fund is inflation-proof.

Kott said lawmakers should remember when considering the governor's legislation in March that the Legislature is not being asked to decide on the issue, but rather to put the issue to voters.

"We're asking Alaskans to determine their own destiny. This is the year to put it on the ballot. We're running out of time," Kott said.

It's possible that the governor's conference could decide against putting the issue to voters.

Senate President Gene Therriault of North Pole said even if the issue doesn't make it to the ballot, the conference and special session will be a good opportunity to educate the public about the fiscal gap and the Permanent Fund.

• Masha Herbst can be reached at

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