Fund proposals flood legislative committees

March hearings slated for permanent fund recommendations

Posted: Sunday, February 29, 2004

The Alaska Permanent Fund took center stage last week in the Legislature with six different proposals working their way through various committees.

Lawmakers are preparing for committee meetings in mid-March to discuss whether to use some of the permanent fund to help plug the state's fiscal gap.

Some lawmakers are pressing for use of the fund to help pay for state government, while others think it wiser to send the money to cities.

Others adamantly oppose any use of the $28 billion fund on anything other than dividends, which have been paid to every eligible person in the state since 1982.

Proposals for constitutional protection of dividends have surfaced in committees: two by House and Senate Democrats and another by Senate Republicans.

And then there's the endowment method for managing the fund, as proposed by its board of trustees. The proposal would inflation-proof the entire fund and cap spending of the earnings at 5 percent of the total value of the fund.

This would provide regular, stable dividends, according to the trustees.

Senate President Gene Therriault, R-North Pole, said lawmakers ideally will have a proposal to the Senate floor for a vote by the end of March.

The meetings scheduled to begin on March 15 are the result of a compromise between Gov. Frank Murkowski and the Legislature. Originally the meetings were supposed to be held in a special session March 1.

Murkowski held the Conference of Alaskans in Fairbanks in mid-February, at which 55 delegates were asked to make recommendations on the permanent fund and fiscal gap. The group recommended constitutional protection for the dividend, use of some of the earnings of the fund for government and adopting the trustees' percent of market value endowment plan.

Although Murkowski promised to introduce proposals based on their recommendations, he instead left it up to the Legislature.

Following the close of the conference, Murkowski made his first public endorsement of using the fund.

"I've always felt there was justification for using a portion of the permanent fund for government," Murkowski said. "The question is how much belongs within the purview of the Legislature."

Democrats accused the governor of going back on his word for not introducing his own legislation, noting that he does not agree with the recommendation to constitutionally protect dividends.

On Friday, the Senate Judiciary committee passed four proposals that would make fundamental changes to the permanent fund.

A proposal by Sen. Kim Elton, D-Juneau, would send 80 percent of the annual earnings of the fund to dividends and the rest to state government. That would result in higher dividends and provide about $260 million a year to the state.

The proposal would take effect only if the trustees' percent of market value endowment plan is adopted into the state constitution.

Both require approval by two-thirds of the Legislature and a majority of citizens in the next statewide election.

"One of the reasons I introduced the bill is to make sure that the Legislature has all the tools necessary to accomplish the goals of the Conference of Alaskans," Elton said.

Elton's proposal, however, was amended in committee by GOP lawmakers, making passage of the measure contingent on implementation of a constitutional spending cap on the state budget.

Republican Sens. Scott Ogan, Ralph Seekins and Therriault also amended a dividend protection proposal by Sen. Georgianna Lincoln, D-Rampart, with the same spending cap provision.

The trustees' percent of market value plan also was approved by the committee Friday, but two lawmakers, Sen. Johnny Ellis, D-Anchorage, and Ogan, R-Palmer, voted no.

"I'm still working on the pros and cons of the proposal," Ellis said, noting that he may support the measure if it makes it to the full Senate for a vote.

Ogan's resolution to enshrine the dividend in the constitution also passed out of the committee, but with a few distinctions from the Democrats' proposals.

His Senate Joint Resolution 24 requires implementation of a budget spending cap and does not include a provision for inflation-proofing the fund.

Ogan said inflation-proofing already is in state law and the Legislature has a "good track record" for protecting the fund against inflation.

On the House side, the Community and Regional Affairs committee approved a proposal by Rep. Carl Moses, D-Unalaska, to provide dividends to cities based on population.

The "Municipal Dividend" plan would pay dividends, inflation-proof the fund and use the leftover earnings to distribute to cities.

Juneau would have received about $7.7 million under the plan based on the city's population in 2002. A minimum of $40,000 would be paid to smaller cities under the plan.

Although it's been relatively smooth sailing for permanent fund proposals in committee this week, one dividend protection plan, House Joint Resolution 3 by Reps. Eric Croft and Harry Crawford, both Anchorage Democrats, was almost killed this week in the House State Affairs committee.

The measure was rejected on a 3-3 tie in committee. Committee member Rep. Paul Seaton, R-Homer, was back in his district visiting constituents during the vote, so the committee is likely to reconsider the proposal this week.

Seaton said he does not oppose dividend protection, but added he is uncertain whether he will support the proposal.

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