Hudson plugs budget-planning plan

Some lawmakers object to dipping into Permafund earnings

Posted: Tuesday, February 22, 2000

Last year, Rep. Bill Hudson was gravely earnest about the need for the Legislature to tackle the difference between state spending and revenues.

Things haven't changed.

The Juneau Republican spent this morning explaining his bill that would use part of the Alaska Permanent Fund to help cover the state's so-called fiscal gap. It was the bill's first hearing, before the House State Affairs Committee.

``This is the responsible thing for us to take on now and pass before the end of this session,'' said Hudson. ``I don't believe that we have the great benefit of sitting back on our hands and doing nothing.''

In a few years the state will have spent its savings, and tax legislation will start flying as lawmakers scramble to find money to pay for state services, he said.

Alaska will become an unattractive place to live, said Hudson, the only person testifying on the bill.

Only committee members Reps. Jeanette James of North Pole and Scott Ogan of Palmer, both Republicans, asked Hudson about the measure.

Ogan, who belongs to a four-member minority of conservative Republicans, said any plan that could impact dividends was unacceptable, given overwhelming voter rejection of a plan last year that would have drawn on permanent fund earnings for state spending.

``I think the public was saying: `Look. Take the dividend off the table,''' Ogan said.

The Hudson measure would allow for continued inflation-proofing of the fund's principle and would keep dividends at pretty much the same level over the next decade as they would be without his bill, Hudson said.

James, committee chairwoman, said she'd schedule Hudson's measure for a second hearing next week. Expressing doubts about the measure's ability to protect dividends if inflation went up, she said constituent demands for programs would push the Legislature to continue spending more. In inflationary times, the 80 percent allowance for dividends may come in lower than projected.

``You have to have something that is more stable,'' she said.

As of the end of 1999, the z permanent fund was worth close to $27 billion, with nearly $8 billion of that in the earnings reserve account.

GOP Reps. Alan Austerman of Kodiak, Gail Phillips of Homer and Lisa Murkowski of Anchorage are co-sponsoring the measure.

Hudson said the calculations under the measure would go as follows:

Assuming the fund earns an 8 percent return, 3 percent of that would go toward inflation-proofing and 5 percent for state spending and dividends.

Of that 5 percent, 20 percent would go toward state spending and 80 percent would go to dividends.

The amount available for dividends would stay slightly below current projections, he said. Alaskans would split up about $1.1 billion under the bill rather than the $1.2 billion expected under the current system. Over the next 10 years, the total paid in dividends would be nearly $12.3 billion rather than the near $12.5 billion under the status quo.

The bill would also change the way money available for distribution from the fund is calculated by basing that on the market value - rather than net income - of the fund over five years.

One of Hudson's biggest concerns is that legislators will begin taking pot shots at his bill by misrepresenting how it changes dividend distribution.

``They must not lie,'' Hudson said.

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