Funding plan for scholarship program falters

Some in Senate support program, but question how it will be funded

Posted: Sunday, March 07, 2010

Legislators are proving skeptical of Gov. Sean Parnell's plan to finance his Governor's Performance Scholarships through a new endowment.

Key legislators in both the House and Senate have balked at setting aside the $400 million Parnell has requested. If they approve the program at all, it may have to be funded in the budget each year.

Parnell warned that could set back his education initiatives for Alaska.

In the Senate, there's some support for the goal but questions about the funding method.

"Establishing the scholarship program is one step," said Senate President Gary Stevens, R-Kodiak. "Paying for it is the second step, which is bigger."

The Senate is expected to discard the endowment as well.

"I didn't sense a lot of legislative enthusiasm for that funding mechanism," said Senate Majority Leader Johnny Ellis, D-Anchorage.

In the House of Representatives, the endowment has been amended out of the scholarship proposal.

Parnell was publicly critical of that decision Friday.

"The Governor's Performance Scholarship is a top priority for my administration," Parnell said in a statement released late Friday.

Parnell wants $400 million set aside to guarantee the scholarships will be funded on into the future, despite any future budget troubles facing the state.

"The interest and earnings from this set-aside will provide sustainable funding for the scholarships over time without any additional burden on the General Fund.

Parnell and Education Commissioner Larry LeDoux want Alaska's school children to know that if they take a tougher course load to qualify for the scholarships, the money will be there to pay for them.

Some legislators, however, have worried that growing state budget will outpace declining oil revenues, and leave the state unable to pay for state services.

"With even a moderate decline in oil prices we could rapidly be having to draw on reserves," said Rep. Mike Hawker, co-chair of the House Finance Committee.

The Alaska Constitution prohibits dedicated funds. Parnell said his endowment proposal would be a promise to the state to continue funding the scholarships, but would not be legally enforceable.

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