Education endowment would use fund earnings

Posted: Tuesday, February 25, 2003

Legislators and the Murkowski administration are looking at proposals to fund education using permanent fund earnings, House Speaker Pete Kott said Monday.

Kott, a Republican from Eagle River, said such a proposal is being examined by several members of the Republican-controlled House, but he would not identify them.

Gov. Frank Murkowski's spokesman, John Manly, said the governor is looking at the idea, but has not made a decision to pursue it.

Manly said the basic idea is to ask voters to change the state constitution to adopt a "percent-of-market-value" approach to spending from the Alaska Permanent Fund, the state's oil-wealth savings account.

The plan is a new angle on a proposal the permanent fund board wanted legislators to put on the ballot last year. That proposal assumed the fund would grow, on average, 8 percent a year. It called for using 5 percent of the fund's market value each year for dividends or other spending. That would leave the remaining 3 percent for inflation-proofing.

Manly said one scenario the administration has looked at is splitting that 5 percent evenly between dividends and an education endowment.

"It's all still in the formative stages," he said. "The governor hasn't made any firm commitments one way or another."

Kott and Manly said the proposals envision using a share of permanent fund earnings to replace current state spending on education. Education spending would not increase, they said.

Assuming legislators don't divert spending elsewhere, the use of the permanent fund money could substantially reduce the amount the state would need to take each year from its budget reserve account. The Constitutional Budget Reserve, funded by settlements from oil-revenue disputes, holds $1.9 billion.

The Legislature has been using that fund to balance the state budget, but the Department of Revenue has estimated it will be depleted by June 30, 2005.

Murkowski ran on a campaign of balancing the state budget by increasing revenues from resource development. He vowed not to change the permanent fund or the dividend program without a vote of the people.

"Obviously, a constitutional amendment is a vote of the people," Manly said. The proposal could not be voted on until November 2004, because constitutional amendments only can be approved in a general election.

In a 1999 advisory ballot, voters resoundingly rejected a proposal to use permanent fund earnings to pay for state government, but Kott said tying the spending to education might make it more palatable.

He compared it to proposals in other states to allow gambling.

"The way they sell that to the general public is, 'We're going to use a substantial amount of the proceeds, the revenue, to fund education.' You know education is like apple pie, Chevrolet and Grandma, I guess," Kott said.

A permanent fund analysis of a proposal similar to the one described by Manly showed an individual Alaskan would receive about $9,040 in dividends from 2005 to 2012. Under the current method of calculating dividends, that same person would receive $10,890 in dividends during the same time period.

Murkowski probably will decide whether to pursue the proposal within the next two weeks, Manly said. If a legislative proposal is introduced, Kott said he also expects it to be out within the next two weeks.

To put a constitutional amendment before voters requires a two-thirds vote of the Legislature, which would require support from minority Democrats.

Democratic leaders said they aren't prepared to say how they'd vote on the proposal without seeing more details.

"I think our first question would be, what is it about Frank Murkowski and the permanent fund?" said Senate Minority Leader Johnny Ellis, an Anchorage Democrat. "I heard him make a promise that there would be no use of permanent fund earnings. If this is a serious proposal from the Murkowski administration, it sounds like all bets are off from the governor with regards to the permanent fund."

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