Hammond takes on `Mackie plan'

Posted: Friday, February 04, 2000

Former Gov. Jay Hammond is glad the public is talking about the Alaska Permanent Fund and its role in closing the state's budget gap.

But he doesn't think the ``Mackie plan'' is a good idea and he has concerns about some other plans being discussed.

Hammond, governor when the oil-wealth savings account was created, shared his thoughts on several proposals this morning with a joint meeting of the Senate State Affairs and Judiciary committees.

``I commend you folks for addressing the issue and confronting something that has to be resolved,'' he said. ``To do nothing but more of the same would be catastrophic.

``Certainly there are elements of every plan that I find appropriate,'' he said. There are also elements that concern him.

Sen. Jerry Mackie's permanent fund proposal has received the most attention so far. He has proposed giving each Alaskan $25,000 and then ending the dividend program and using the fund's remaining $12 billion to $14 billion exclusively as an investment account to help pay for state government.

The problem, Hammond said, is that it will probably never pass the Legislature. And if it did, it could overheat the economy, and the $25,000 would be subject to large federal taxes.

``I suggested that rather than a slice of the golden goose, it might prove to be nothing more than fumes from an old turkey,'' he said.

He suggested perhaps allowing people to borrow $25,000 and pay it back with future dividends as an alternative.

Mackie said he's aware of Hammond's concerns. He is working on an alternative plan, but he said he's not yet ready to discuss it. He defended his decision to place a plan on the table and start the discussion.

``What motivates me is that somebody has to show some leadership around this place for a change,'' he said.

Sponsors of a proposed amendment to enshrine in the constitution protection for the dividend program and inflation-proofing the fund tried to convince Hammond of the merits of their proposal.

Hammond said he had some concerns about it as well.

Putting those provisions in the constitution could endanger the tax-exempt status of the fund because the federal government could argue it's not being used for a public purpose, Hammond said. If the amendment didn't pass, he said, there would be no backup plan. He's also concerned that it would tie lawmakers' hands in a fiscal emergency.

He believes a constitutional amendment may not be necessary, that an advisory vote of the public would carry enough weight on its own to spur legislators to make inflation-proofing and dividends a priority.

However, he said, ``I'm not taking a position pro or con on it.''

Wasilla Republican Sen. Lyda Green, a sponsor of the constitutional amendment, said she has not heard any evidence that the proposal would endanger the tax-exempt status of the fund. And she said the public will not be willing to discuss any use of the fund earnings for state government until they know the dividend and inflation-proofing are protected.

Hammond said cutting the budget and using permanent fund earnings should not be the sole solution to the state's fiscal gap because those hurt Alaskans most.

Some kind of tax - a seasonal sales tax or a modified version of an income tax - that taps outside workers or visitors needs to be part of the solution, he said.

He acknowledged the political difficulty of taxes, however.

``People have asked me what I would do if I was governor. I'd be fighting impeachment,'' he said, because of his support for an income tax.

He saw some merit in a plan by Sen. Kim Elton, a Juneau Democrat, that would among other things, use some permanent fund earnings to balance the state budget, but cap that amount at 20 percent and require that inflation proofing and dividends be protected.

Hammond wasn't sure 20 percent was the correct percentage. However, he said, ``That approach is worthy of a look.

``I don't want to be on record as saying I advocate this one as opposed to another one.''

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