Conference backs guaranteed PFD

Delegates recommend constitutional safeguard for dividends, using part of permanent fund to pay for state government

Posted: Friday, February 13, 2004

FAIRBANKS - The Conference of Alaskans ended its three-day search for state funding solutions Thursday by recommending constitutional protection for Alaska Permanent Fund dividend checks and use of some of the fund for state services.

Gov. Frank Murkowski called the conference - a broad range of officials, business leaders and citizens - to make recommendations on the future of the permanent fund and solutions to the state's chronic fiscal gap.

Murkowski and the Legislature will consider the recommendations when drafting legislation.

The 55 delegates meeting at the University of Alaska Fairbanks also passed resolutions calling on the state to use an endowment approach to managing the permanent fund.

The percent of market value approach would cap permanent fund spending at 5 percent and inflation-proof the entire fund. Permanent fund trustees say the plan would create a stable, regular dividends.

A fourth resolution from the conference recommends maintaining a "prudent" balance in the state savings account, the Constitutional Budget Reserve, but does not specify how much money should be left untouched. The CBR has been used in recent years to plug the fiscal gap but is projected to run dry in 2007.

The conference's recommendation to use a portion of the permanent fund for government came along with a caveat: "that the governor and Legislature take action to balance the state's revenues and expenditures, including but not limited to, consideration of a personal income tax, other broad-based taxes and other alternative sources of income."

It also said that before the state could use permanent fund earnings, dividends must be paid out under the percent of market value plan.

Clark Gruening, a delegate from Juneau and permanent fund trustee, said recommending an income tax or other revenue source to balance the budget would help Alaska pay its own way, rather than relying on the federal government or just the permanent fund.

"We did, under territorial days, have a tax and it was repealed in 1980, and it was a mistake," he said. "And it, I think in part, contributed to the kind of problem that we have now."

Shortly following the close of the conference, Murkowski's office released a statement declaring the meeting a success but did not address its discussion of an income tax. Murkowski has opposed such a tax since taking office in 2002.

Enshrining dividends in the constitution and the decision to recommend an income tax drew some of the most heated debate as delegates fine-tuned the wording of recommendations.

State Sen. Ben Stevens, an Anchorage Republican and conference delegate, said he would fight passage of a resolution in the Senate to constitutionally ensure dividend checks.

Stevens said guaranteeing dividends would put the check ahead of important programs such as education, public safety and transportation.

Proponents argued that guaranteeing a dividend would help garner support for tapping the fund for state government under the percent of market value plan. Both would require a constitutional amendment.

"I hope that people don't vote for a constitutional amendment as a tactic to get a different constitutional amendment passed," said delegate Steve Rieger, an Anchorage businessman and former state senator.

Delegate Clem Tillion, a former state senator from Halibut Cove, saw it differently: "Without passing this we are just allowing a raid on the Permanent Fund."

Delegate Cliff Groh, city attorney for the City and Borough of Sitka and an income tax supporter, said he initially opposed enshrining the dividend but was persuaded to support it during the course of the week.

"There are some people who say, 'I'll never have an income tax if there is a permanent fund dividend,'" he said, noting that if dividends were constitutionally protected then the state would have to face other options.

Read the full text of the following reports:

The Constrituional Budget Reserve Resolution

The letter of declaration from the conference

The press release from the final day of the conference

The connection between the Alaska Constitution and Permanent Fund Dividends

The resolution addressing state services and the Permanent Fund

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