Governor prods lawmakers

Murkowski warns inaction on fund bill could bring crash

Posted: Wednesday, May 05, 2004

Gov. Frank Murkowski implored senators to approve measures changing management and use of the Alaska Permanent Fund in coming days, and warned of economic hardship if they don't.

Proposals to use the fund for state government will face one of their toughest hurdles with the Senate in the next few days. In an effort to win lawmakers' support, Gov. Frank Murkowski addressed the body on Tuesday.

One measure would allow voters in November to decide whether to approve a constitutional amendment to adopt an endowment method of managing the $28 billion fund. The state House approved the so-called percent-of-market-value method last week, along with a more controversial proposal that would use 50 percent of the annual earnings on dividends, 45 percent on state government and 5 percent on city governments.

Senate President Gene Therriault, R-North Pole, said the Senate likely will take up the proposals within the next few days. The last day of the regular legislative session is May 11, but Murkowski has hinted that he will call a special session if the issue is not brought to a vote.

On Tuesday, Murkowski evoked memories of the economic crash Alaska suffered in the mid-1980s that led to bank foreclosures, widespread bankruptcies and dramatic declines in real estate values.

"By doing nothing we will invite another potential economic catastrophe like the one that hurt thousands of Alaskans in the 1980s," Murkowski said. "I don't think anyone wants to risk going back and telling our constituents, 'Gee, I'm sorry the bank foreclosed. I'm sorry that you couldn't get your inventory loan. Sorry that you lost your job or can't retire now because the equity in your property disappeared. But you know what I did - I saved your dividend. Think about it."

Senate Minority Leader Johnny Ellis, D-Anchorage, said Murkowski and the Republicans have rejected Democrats' proposals to constitutionally protect dividends or the 50-45-5 percentage split between dividends, government and municipalities.

Ellis said the 50-45-5 split would be passed as a bill rather than a constitutional amendment, leaving the statute open to a change by a future Legislature with a simple majority vote. If the split levels or the dividend were enshrined in the constitution, changing it would require a two-thirds majority vote in the Legislature and a statewide vote.

"The deal today is not necessarily the deal tomorrow and if there's no assurance, this is going down in flames," Ellis said.

Murkowski warned senators that failure to approve use of the permanent fund could result in a near-billion dollar deficit in fiscal year 2006. Filling the gap would require significant taxes, cuts to state services, a draw on the state savings account or a combination of the three.

During an afternoon press conference Murkowski Chief of Staff Jim Clark said: "There's been a tendency to let this whole thing get twisted around to just be about the dividend. Well, it's not just about the dividend. What this is about is public services and protecting public services.

"We have to take a look at what we lose in public services in rural Alaska, in public education, in public safety, in transport road maintenance, all the basic things that people propose."

Clark noted that the Legislature has failed to approve any of revenue proposals introduced in the governor's budget at the beginning of the legislative session.

"The only thing from that list that's got a chance of passing right now is the tobacco tax," Clark said.

That proposal would raise about $36 million a year, compared to about $650 million that would be raised for the state by using the permanent fund.

Senate Democrats say they want a solution that involves more than just using the permanent fund. But House Democrats made similar arguments before some in their split from their caucus and approved the permanent fund measures.

But the administration needs more than just Democratic votes to pass the permanent fund endowment proposal. The proposed constitutional amendment requires approval from two-thirds of the Senate and some Republicans say they won't vote for it.

With oil prices reaching a recent all-time-high of $37 a barrel, it could be difficult to convince lawmakers that an economic crash is imminent.

Sen. Scott Ogan, R-Palmer, said he isn't ready to use the permanent fund on government until the state cuts its spending.

"I don't want to let anything crash," Ogan said. "I paid a big price for that in the mid-80s in the construction business and watched my property values drop 50 percent."

Ogan said the state needs to cut welfare spending and education funding before looking to tap the permanent fund.

"We've got too many university campuses," Ogan said. "We have single-site school districts. There's all these reforms that need to happen before we look to using the permanent fund."

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