Deal in works on changing permafund

House negotiations could lead to fund's earnings being spent on state government

Posted: Thursday, April 22, 2004

House Democrats and Republicans are trying to negotiate a deal on a constitutional amendment that could lead to Alaska Permanent Fund earnings being spent on government.

Democrats have said repeatedly they oppose any plan that relies solely on permanent fund earnings to fill the state's budget gap. But some Democrats said Wednesday they may support the constitutional amendment, depending on what comes out of negotiations.

Rep. Albert Kookesh, D-Angoon, said he might vote yes, although he would prefer other solutions to the fiscal gap, because he fears the alternative will be deep budget cuts.

"This is the only train leaving the station," Kookesh said. "And the deep cuts affect rural Alaska more than they affect urban Alaska.

The constitutional amendment and an accompanying bill were scheduled for action on the House floor Wednesday, but Republican leaders postponed the debate so GOP and Democratic leaders could work on a deal.

Later in the day, the House adjourned without taking up the bills, but House Speaker Pete Kott, R-Eagle River, said they will be on the calendar Thursday.

He said negotiations are time-consuming, but are otherwise going well. "We're inching our way," Kott said. "I think we will be able to work something out."

Part of the deal could be a bill authorizing bonds for university and kindergarten-12th grade school projects.

Rep. Mike Hawker, R-Anchorage, earlier this year introduced a bond bill dealing with university projects. He said Wednesday he is working on a "moderate expansion" of it to include spending on K-12 deferred maintenance projects.

Gov. Frank Murkowski wants the Legislature to put a constitutional amendment on the ballot that would change the method for calculating distributions from the permanent fund, Alaska's $27.8 billion oil-wealth savings account.

The constitutional change by itself says nothing about how the money would be spent. But a bill accompanying it calls for splitting the nearly $1.2 billion generated under the new formula 50-50 between government and dividends for residents.

Murkowski wants the proposal to help solve Alaska's chronic budget gap, which in 11 of the last 13 years has been filled by dipping into the $2 billion Constitutional Budget Reserve. The reserve is expected to run dry in 2008.

Because the proposal would change the constitution, it requires a two-thirds vote in the Legislature, which amounts to 27 votes in the House. Some Republicans in the 28-member GOP majority will not vote for the amendment, so Democratic votes are needed.

Kott said his rough guess is that 18 to 22 Republicans will vote for the constitutional amendment.

Democrats have said that relying solely on permanent fund earnings puts too much of the burden for balancing the budget on lower- and moderate-income Alaskans because the dividends all Alaskans receive from the fund would be lower.

Rep. Harry Crawford, D-Anchorage, said Wednesday he maintains his opposition to voting for the constitutional amendment unless it includes protection for the dividend at the current level, or higher.

Several Democrats have, instead, been pushing for a change in the way oil fields are taxed that would result in higher taxes when prices are high. Some have also sought taxes on the cruise ship industry.

Rep. Norm Rokeberg, R-Anchorage, said he does not believe changes in oil taxes can get through the Legislature this year because the issue is very technical and changes must be made carefully to avoid creating a disincentive to development.

If the constitutional amendment passes the House, it has a similar hurdle in the Senate, where 14 of 20 members would have to vote for it.

The Republicans have a 12-member majority there, and a few of those Republicans will not give their support, so Democratic votes will be required in the Senate as well.

If the proposal passes both houses, it would go to voters in the November general election.

The House is also set to vote today on a constitutional amendment to limit increases in state spending.

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