Legislature 2001: Caucus split on permafund

House approves first piece of long-range plan

Posted: Tuesday, April 24, 2001

When presented Monday with their first opportunity this year to put in place one piece of a long-range fiscal plan for the state, members of the new Fiscal Policy Caucus went separate ways.

The House voted 28-11 to approve a bill by Rep. Norm Rokeberg, an Anchorage Republican, to adopt a new formula for allocating oil revenue that would put more money into the state's general fund and less into the Alaska Permanent Fund. A vote of reconsideration might be taken today.

The bill would mean a gain of about $40 million to the general fund next year, and $333 million over the next 10 years. It is projected to reduce permanent fund dividends by a total of $90 per person from 2006 to 2011.

Rep. Bill Hudson, a Juneau Republican and co-chairman of the bipartisan, bicameral Fiscal Policy Caucus, voted yes. Rep. John Davies, a Fairbanks Democrat and another co-chairman, voted no, as did some other Democrats involved with long-range fiscal brainstorming and conservative Republicans who oppose any change in the permanent fund.

The lack of a unified Fiscal Policy Caucus during Monday's debate was particularly notable because the impetus for forming the group came overwhelmingly from Democrats and moderate Republicans in the House.

"Sure, it disappoints me," Hudson said afterward. "(But) it really is a question of strategy more than anything else. ... I don't think it damages the purpose of the caucus."

The caucus, created four weeks ago out of impatience with the Republican leadership of the Legislature, has not yet settled on particular solutions for the state's budget gap, although individual members have introduced tax legislation. Hudson said he always has believed a long-range plan has to be developed incrementally, not in one big package.

Rep. Beth Kerttula, a Juneau Democrat, said she supports the Fiscal Policy Caucus but voted against Rokeberg's bill because there are other steps that should be taken before slowing growth in the $25.9 billion permanent fund. She favors increases in oil and alcohol taxes, and implementation of a statewide cruise ship head tax.

"You may not need this one if you get your other pieces in place first," Kerttula said.

Rokeberg urged the House to "accomplish the art of the possible" and take advantage of the opportunity to educate the public about the coming fiscal crisis.

House Minority Leader Ethan Berkowitz, an Anchorage Democrat who voted no, said timing is the issue.

"Ultimately we know that the permanent fund is going to be part of the solution," Berkowitz said. "(But) moving forward shouldn't be done randomly."

Meanwhile, a proposed constitutional amendment that would prevent the Legislature from ever changing the permanent fund dividend formula was moved out of the Senate Judiciary Committee on a 4-1 vote.

Sen. Jerry Ward, an Anchorage Republican, would put into the constitution the current formula for distributing income from the fund's investments, now used to pay dividends and then to inflation-proof the principal. "Excess earnings" that remain after dividends and inflation-proofing could be used for government operations, although they haven't been, said Jim Kelly, a spokesman for the permanent fund corporation.

Senate Minority Leader Johnny Ellis, an Anchorage Democrat, opposed the bill, while acknowledging it might be popular. If the Legislature is prohibited constitutionally from touching most permanent fund earnings, that might invite taxation by the Internal Revenue Service, he warned. Ward previously told the committee he had placed a call to the IRS concerning the proposed constitutional amendment, which made senators nervous.

Senate Judiciary Chairman Robin Taylor, a Wrangell Republican, said he's not sure there's the necessary two-thirds support in the Legislature to put Ward's proposed constitutional amendment on the 2002 general election ballot.

But the discussion could broaden. Senate State Affairs Chairman Gene Therriault, a North Pole Republican, said he's now inclined to give a hearing to a new concept advanced by the permanent fund board of trustees. It would be a constitutional amendment limiting the annual payout from the fund to 5 percent of the five-year average market value, a step intended to build in inflation-proofing over the long term and protect the dividend. Kelly said that still would leave the possibility of $175 million to $300 million of excess earnings that could be used for government operations in some years.

Bill McAllister can be reached at billm@juneauempire.com.

Trending this week:


© 2018. All Rights Reserved.  | Contact Us