The Senate Finance Committee heard testimony from officials of the Alaska Permanent Fund Corp. Monday on a plan that would change the way the fund is managed.
Corporation Executive Director Bob Storer called the current methodology "archaic," saying it made sense when it was devised in the late 1970s.
The proposed plan, known as percent of market value, or POMV, would combine the $27.4 billion principal and earnings and inflation-proof the entire account. It also would limit the annual payout to 5 percent of the fund's market value over a five-year period. This would make 5 percent available, regardless of market performance, according to the Permanent Fund Corp.
Senate Joint Resolution 18, proposes a constitutional amendment to use the POMV plan. A change to the Alaska Constitution requires a two-thirds majority vote in the state House of Representatives and the Senate. If legislators approve the resolution, the question will be put to voters in the November election.
The Legislature is devoting this week to the discussion of the POMV proposal and potential solutions to the state fiscal gap.
Storer said that under POMV, the Legislature would have the authority to decide to spend less than 5 percent of the fund's market value for state government.
But Sen. Hollis French, D-Anchorage, said if the state became accustomed to extra revenue from the 5 percent, the Legislature would come to depend on it.
"Eventually you come to the place where you can't take less than 5 percent," French said.
Sen. Con Bunde, R-Anchorage, expressed concern that Alaska voters are dead-set against any changes to the permanent fund.
"I'm very concerned about putting something on the ballot that's predestined to fail," Bunde said.
Though Bunde later said he thinks the public's fears about changing the permanent fund may be unwarranted, he said that if Alaskans voted down the amendment, it's likely legislators would be loath to broach the issue again for years.
"If the public just out of fear or misinformation wants to say no to POMV ... that leaves us with two options, either onerous budget cuts or onerous taxes," Bunde said.
The committee did not hear public testimony on SJR 18. Citizens will be able to testify Wednesday on that proposal and others that the committee will discuss today. Testimony is scheduled from 1:30 to 4 p.m. and then from 6 to 9 p.m.
Today the committee will discuss a bill to increase education funding and four proposed constitutional amendments, including one to enshrine the dividend in the constitution.
Gov. Frank Murkowski addressed the committee Monday morning to state the importance of resolving the state fiscal gap this session.
"It is not responsible to pass on to a future Legislature or governor the fiscal gap with which I was confronted on assuming office in December 2002," Murkowski said.
He asked the senators to consider several criteria when evaluating the proposals that will be discussed this week. He asked them to consider whether the proposals are better than the effects of the loss of public services that would result if the budget gap isn't plugged, and whether the proposals have bipartisan support. Murkowski also asked legislators to consider whether the proposals would affect "reasonable" expectations for the permanent fund dividend, among other questions.
Masha Herbst can be reached at firstname.lastname@example.org.