Knowles silent on fiscal veto

Governor has backed permafund vote in past

Posted: Tuesday, March 05, 2002

There's speculation at the Capitol that Gov. Tony Knowles might veto a revenue-raising package that contains permanent fund earnings.

But Knowles left the question open in an interview this morning. And a member of the bipartisan Fiscal Policy Caucus said he doesn't think it'll happen.

Knowles repeatedly has called for a public vote on any proposed change to the permanent fund earnings and dividends. Such a vote was held in a special election in 1999, when 83 percent rejected use of permanent fund earnings for government operations.

The question is back before the Legislature this year, due to a projected $1 billion-plus budget gap that could cause massive budget cuts and sudden, sharp tax increases if left unattended by 2004.

As part of a package, the Fiscal Policy Caucus has a tentative proposal that would set up a distribution formula for permanent fund earnings based upon a percentage of average market value. The distribution would be split 50-50 between dividends and government. In the first full year of the plan, with a 7 percent payout, $930 million would be diverted toward government, lowering dividends and eating into inflation-proofing of the fund.

Knowles noted his past pledges to have a public vote on such questions and his comment during the State of the State speech this year that permanent fund earnings should be the final piece of solving the fiscal gap during the last year of a three-year phase-in. But he would not be pinned down on whether there is an implicit veto threat this year.

"There is a plan that's evolving," the governor said. "I don't want to inhibit the development of that plan by opining where they're right or wrong. ... I really believe it has been very positive what the Fiscal Policy Caucus has done. I want to encourage this open and spirited debate."

Rep. Ken Lancaster, a Soldotna Republican who is chairman of the fiscal caucus subcommittee that drafted the latest version of the plan, said he has heard non-caucus legislators speculate about a veto.

"I don't think that's true," Lancaster said this morning. "I think if you get that package, I don't see how he can possibly not sign it."

The reason for not having the public vote is simple: "There's not time," he said.

Without a revenue package this year, there's no way to completely avert the cliff in 2004, he said.

Bill McAllister can be reached at

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