New Permanent Fund plan on the table

Posted: Wednesday, February 16, 2000

A new plan to spend some Alaska Permanent Fund earnings on state government is on the table. It's the first piece of what sponsors say will be a long-term fiscal plan that may also include taxes and budget cuts.

Rep. Bill Hudson, a Juneau Republican, is among several sponsors of House Bill 411.

Hudson said the plan would inflation-proof the fund and protect the annual dividend Alaska residents receive, while also allowing a percentage of permanent fund earnings to be used for state government.

Co-sponsors of the measure include Reps. Alan Austerman of Kodiak, Gail Phillips of Homer and Lisa Murkowski of Anchorage, all Republicans.

The bill would change the way money available for distribution from the fund is calculated by basing that on the market value of the fund over five years, rather than the net income over five years. That is a change the permanent fund management has advocated, Hudson said.

Of the amount calculated to be available for distribution each year, 80 percent would be allocated for dividends. Estimates are the dividend would grow to $2,000 per person by 2010 under that formula, Hudson said.

The remaining 20 percent would be available for state government spending. That would generate about $400 million a year, which would go about halfway toward closing a fiscal gap that in 2001 is estimated to be $800 million.

It is just one piece, however, Hudson said. Other pieces are still being developed. One of those pieces will be continued budget discipline and a third may be taxes, Hudson said.

``We are looking at everything from sales taxes to income taxes to motor fuel taxes to oil (industry) taxes.''

``As soon as we get the other legs of the table put together, we will then unveil our proposal,'' Hudson said.

Jerry Ritter, a spokesman for the House majority, said the bill is not an official House majority plan and there is not a majority position on it yet.

Representatives of the. Tony Knowles and minority Democrats could not be reached for comment by mid-afternoon. Permanent Fund Corp. representatives were also not immediately available.

Hudson said his group is working closely with former Gov. Jay Hammond on the plan. ``I'm communicating with Jay Hammond almost on a weekly basis now,'' he said.

In an advisory vote last fall, Alaskans resoundingly defeated a long-term fiscal plan legislators put together last year that would have allowed permanent fund earnings to be spent on state government.

Hammond's criticism of that proposal is viewed as having helped defeat it.

He was critical of the fact that there was no cap on the amount of permanent fund earnings that could be spent on state government. In a meeting earlier this month with legislators, Hammond said a solution to the fiscal gap should also include some form of taxes.

The overall long-term plan is likely to require sacrifice of all Alaskans, Hudson said, including industries, individuals and those who benefit from government spending.

``When we get all done, I can almost assure you everybody's going to be unhappy with us,'' he said. But the state's fiscal gap cannot be closed by budget-cutting alone, he said.

To cut that amount from the budget, he said, ``you'd have to cut the throat of the economy of Alaska.''

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