House OKs tapping permanent fund

Revenue would come from account made up of money from legal disputes over oil royalties

Posted: Friday, April 29, 2005

The state House of Representatives voted 22-17 Thursday to use about $30 million a year from an account within the Alaska Permanent Fund.

The money would come from the investment earnings of a $424 million account made up of money from legal disputes between the state and oil companies over oil royalties.

Permanent fund dividend checks would not be affected if the money is used because the earnings of the so-called Amerada Hess account are not considered when calculating annual dividends. The earnings up to now have been sent back to the principal of the fund.

If the bill passes the Senate and is signed by Gov. Frank Murkowski, it would be the first time permanent fund money has been used for general government purposes.

Opponents of the bill said with a projected $500 million surplus this year, tapping the fund is unnecessary.

"We don't need to be here," said House Minority Leader Ethan Berkowitz, D-Anchorage. "There are other ways to fund the projects. This is not the right way. This is not the right time."

Rep. Nancy Dahlstrom, R-Anchorage, said the money could be put to good use but the Legislature should take a public vote before taking it.

"We're not only telling voters they don't have the right to vote on it but that we don't want them to vote on it," she said.

Rep. Mike Hawker, R-Anchorage, said the way the Amerada Hess account is set up now it does not benefit Alaskans even through higher dividends.

"It immediately fails what we call the public-purposes test," Hawker said.

Hawker said the state faces significant financial troubles such as rising health care costs and a more than $5 billion funding shortfall in the state's employee retirement systems. He said the state needs the money now.

"No, folks, we are not awash in cash," he said. "We have many competing needs."

Rep. Beth Kerttula, D-Juneau, said the Legislature should consider tapping into more of the windfall that oil companies are making through high oil prices.

"Oil prices have risen 121 percent since 2002," Kerttula said. "Exxon turned the highest profit of any American corporation ever last year, yet here we sit about ready to take the first leap into our fund for our future for this state and it is not the thing to do."

The bill by Murkowski was introduced at the beginning of the legislative session and originally aimed to use the account's earnings to pay bond debt for road construction and other capital projects. But the proposal was amended in the House committee process to send the investment earnings to the state general fund, which is used for government services.

Murkowski spokeswoman Becky Hultberg said the governor views passage of the bill as "positive momentum toward a responsible capital budget."

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