Lawmakers in the Senate hit a partisan impasse on Thursday over the first key element of Gov. Frank Murkowski's plan to close Alaska's chronic budget woes.
Murkowski needed at least four Democratic lawmakers to sign on to a constitutional amendment capping state spending in an effort to ask voters for permission to tap the permanent fund.
But Senate Democrats held firm and rejected the cap after GOP lawmakers turned away a request to exempt K-12 education and the University of Alaska.
Democrats voted in unison to reject the spending cap measure after GOP lawmakers rejected their education amendment along party lines.
Senate Majority Leader Ben Stevens, R-Anchorage, said lawmakers appeared at an impasse just one day before they were to take up a permanent fund vote that requires Democratic support.
"In my estimation, no matter how you put this combination together you don't get to 14 (votes) and I don't see any change in that," said Stevens.
Republican support for Murkowski's fiscal plan is already tenuous in the Senate, Stevens said, and it gets more fragile as concessions are made on the spending cap.
"If we had picked that up tonight we would have lost more people on the Republican side. You would have lost the conservatives to get the Democrats," Stevens said.
The spending cap fight is a prelude to a vote on a constitutional amendment to change the way the $28 billion Alaska Permanent Fund is calculated.
This so-called "Percent of Market Value" amendment would make about $1.3 billion available each year for lawmakers to divide between dividends to eligible Alaskans and government.
Murkowski wants to use a portion of the money to help close the budget shortfalls that have averaged about $400 million annually.
But it would be new ground for the Legislature, which for years has feared the political backlash of using permanent-fund revenues without voter permission.
Both measures are constitutional amendments that must be ratified by voters in the Nov. 2 general election. And so the two-thirds vote needed to pass them makes the issue even more difficult.
Murkowski administration officials say they need the spending cap amendment on the ballot in hopes of winning over Alaskans suspicious of giving the Legislature access to so much money.
The 12 Republican votes alone in the Senate aren't enough to muster a two-thirds vote and several GOP lawmakers have expressed unwillingness to approve the POMV measure anyway.
But lawmakers on both sides showed no willingness to budge to keep the issue alive in the remaining days before the May 11 adjournment.
Sen. Hollis French, D-Anchorage, characterized the cap as an unproven fiscal "experiment" that would come just as the state needs to spend more to keep up with rising K-12 education costs.
The spending cap, which uses a complex formula to limit state spending based on the growth in population and inflation, would expire in July 2009.
Federal requirements under the No Child Left Behind Act along with state accountability standards will require more spending, as will shortfalls in the state's teacher retirement system, Democrats argued.
"This is crucial for Democrat support," French said.
Although Republican supporters argue it could still allow state spending to grow between $500 million and $1 billion and also includes provisions to spend over the cap with super-majority votes, Democrats insisted that education be taken out of the mix.
Budget hawks within the GOP argued that would be too much since it would exclude as much as 47 percent of the state's annual expenses from the cap.
"This amendment will make the spending limit meaningless," said Sen. Scott Ogan, R-Palmer.