Mackie plan: Pay each Alaskan $25K

Senator's proposal would end Permanent Fund dividends, cover state government costs

Posted: Tuesday, January 18, 2000

Sen. Jerry Mackie wants to give you $25,000.

The Craig Republican and majority leader of the Senate announced what he's calling the ``Mackie Plan'' for now. The idea is to pay out about $14 billion from the $27.5 billion Alaska Permanent Fund to current Alaska residents, then use the remainder to help pay for state government.

The payout would be the last Alaska dividend, but the state's chronic budget shortfall would be filled without any new taxes, Mackie said.

``I'm convinced that the only way the Legislature will have the will to use the permanent fund, and the people of Alaska will approve, is with something like this,'' Mackie said. ``So if people truly want a solution, this plan should at least merit some careful consideration. If nothing else, this plan will foster a hell of a lot of discussion.''

Mackie's Senate Joint Resolution 33 sets out the plan in the form of a constitutional amendment. The measure would require two-thirds approval from the Legislature and approval from Alaska's voters on Nov. 7.

Under the plan, residents would receive a $25,000 dividend for 2001 - about what's projected to be the sum of the dividends to be paid during the next dozen years. Only current Alaska residents - those here since Jan. 1 - would qualify for the payout.

After the big checks are sent out, the dividend program would end, under Mackie's measure.

The remainder of the permanent fund, some $12 billion to $14 billion, would be managed by the Alaska Permanent Fund Corp., under Mackie's proposal. If that money made 10 percent interest, $884 million would be available for the state's general fund in 2002, Mackie said, and that number would go up each year. That amount is very close to the projected size of the budget gap - the difference between state general fund revenue and spending.

Jim Kelly, a spokesman for permanent fund managers, said that though the fund has earned an average of near 11.7 percent in its more than 15 years of investing, the corporation's current projections show a long-term return of closer to 8 percent in the future.

Without additional revenue, the state will spend down the current budget-patching fund, the Constitutional Budget Reserve, within about four years, leaving permanent fund earnings and taxes as likely replacements.

Bob King, spokesman for Democrat Gov. Tony Knowles, said the plan was something worth talking about.

``It's an interesting idea that is worthy of discussion,'' King said.

The plan drew an incredulous response from Sen. Johnny Ellis, an Anchorage Democrat and Senate minority leader.

``Oh my God,'' he said. ``You can't be serious.''

He said the Sept. 14, 1999, vote - during which some 84 percent of Alaskans rejected a proposal to use permanent fund earnings to help fund government - was a call for a balanced long-range plan, which is the opposite from what Mackie is proposing. The public, he said, may see dollar signs initially, but people will take a different view when they realize what Mackie's plan would mean to Alaska down the road.

``The permanent fund is our economic engine for the future economy of Alaska,'' Ellis said. ``That seems like an irresponsible amount of money to tempt people with the liquidation of a big part of our future. I think it won't take people very long to see that this isn't the best long-range approach to our budget problem.''

Sen. Al Adams, a Kotzebue Democrat, said he likes Mackie's plan because it should prompt a discussion over a long-range plan - a discussion he was worried wouldn't happen. There are questions, he said, but the idea is worth a look.

``I like it because it is a plan that is worth debating,'' Adams said. ``Nobody is going to talk about new taxes. We're going to need something in the next two years. This plan deserves a proper hearing.''

Speaker of the House Brian Porter, an Anchorage Republican, said Mackie had offered ``an enticing proposal.'' He wants to see how the idea would fit within a broader long-range fiscal plan, he said.

As far as Mackie is concerned, his plan would cover the state's budget gap without Alaskans paying any more taxes and without hurtful hacks into state programs. He said he would rather not rely just on the permanent fund, but support for the creation of another new revenue source, such as a broad-based tax, just isn't there. This plan, he said, looks like the only one around that has a chance in the election-year atmosphere at the Capitol.

``I honestly don't believe this is the best use of the permanent fund,'' Mackie said. ``I do believe this is politically achievable.''

The $25,000 would be subject to federal taxes.

Mackie said some people may waste the money, but that's their business.

``Look,'' he said. ``It's not the government's responsibility to tell people how to buy and sell a car or buy and sell a home or how to spend or invest their current paycheck or dividend, so why would we want to tell people how to spend this dividend or invest their money? That's not the role of government.''

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