Senate taps $344 million of permafund for schools

Dems worry bill sets precedent for spending

Posted: Thursday, April 14, 2005

The Alaska Senate has passed what lawmakers called a "watershed" bill that uses the largest amount yet from the state's permanent fund to pay for projects.

The bill approved Wednesday appropriates $344 million from the earnings reserve account of the permanent fund to pay for construction and maintenance of facilities for 27 school districts, universities and vocational training centers.

The money takes care of all requests on the state's deferred maintenance list and pays for construction of new buildings. The University of Alaska campuses will receive dollars for research centers and $5 million will be set aside for the Anchorage Museum of History and Art.

The money is not taken from the core body permanent fund, which is protected by the state constitution. Lawmakers are allowed to spend dollars from the permanent fund's earnings on investments, such as the stock market. The amount for the bill comes from a pot leftover after the dividends and inflation rates are subtracted.

Republicans argue that the permanent fund is large enough to issue dividend checks and pay for large budget items.

"For a good purpose, we can use some of this money that we plowed back in," said Sen. Ralph Seekins, referring to the $2 billion of excess earning reserves the state deposited back into the account in 1990.

This proposed spending has a 1 percent effect on the public dividends over the next 15 years and would reduce each Alaskan's annual check by $10.

The Democrats say this bill breaks a psychological barrier that has kept politicians from raiding the account.

"If we do this once, it will be easier each time until we face that day when the money is inevitably gone," said Senate Minority Leader Johnny Ellis, D-Anchorage.

It's money that the Legislature spends every year. In 2004, some $31 million was placed into the general fund for special projects. In this bill, the $344 million proposed is a one-time appropriation.

"The question is not when (the spending) stops, but when does it start again," said the bill's sponsor Senate President Bill Stevens, R-Anchorage.

"It starts again when a future legislator ... has a project that benefits all Alaskans and it's for the future of Alaskans and is an investment," he added.

Democrats said they agree that schools need money for construction and maintenance, but disagreed on the source, suggesting that funds could come from the Constitutional Budget Reserve and excess oil profits.

The bill, also known as SB 155, passed with a vote of 13-7.

Four Democrats, Sens. Bettye Davis of Anchorage, Donald Olson of Nome, Albert Kookesh of Angoon and Lyman Hoffman of Bethel, were lured away from their party lines for the chance to help schools.

Three Republicans, Sens. Gene Therriault of North Pole, Charlie Huggins of Palmer and Fred Dyson of Eagle River, voted against the measure based on using permanent fund earnings.

There's a question of whether the House of Representatives will approve the bill and whether the governor will sign it. A number of politicians, including Gov. Frank Murkowski, campaigned on promises not to spend permanent fund earnings.

Legislators also tried to spend $7 million from the permanent fund for partial funding of gas pipeline negotiations. The governor vetoed the bill, not based on the money coming from permanent fund earnings but on control issues over how the money would be spent.

• Andrew Petty can be reached at

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